Backed, a new marketplace lending platform that seeks to lower borrowing costs for young adults by mitigating traditional co-signing risks, announced on Wednesday that it has raised $1.5 million in seed funding from angel investors, iAngels, and Cyhawk Ventures.
Co-CEO and founder of Backed, George Popescu, stated:
“Most existing lenders don’t have the capability to properly estimate the default risk of millennials and hence more than 86% are declined or overcharged around 20%+ APR. Our platform enables parents, or ‘Backers,’ to effectively lend their credit history to their children in exchange for lower rates. If they are paying anything more than 11%, they should come refinance with us.”
Gilad Woltsovitch, co-CEO and founder of Backed, explained:
“Parents might wonder how ‘Backing’ is different than traditional co-signing. Traditional lenders are incentivized to notify co-signers only after a loan has defaulted, so that they can profit from accumulated fees, penalties, and accrued interest. Our progressive form of co-signing, known as ‘Backing,’ immediately notifies parents of any payment shortfall prior to default, and provides a 15 day grace period, in which neither the Backer nor borrower’s credit score will be affected.”
Backed plans to allocate about half of the funds to further developing the product, team and company, and half to customer acquisition, revenue growth and becoming profitable within a few years by capturing a share of the market – $4.7 trillion in financial services revenue at risk of being displaced by tech-enabled or fintech company entrants. The website will begin accepting loan applications in NY, NJ, and FL immediately. The loans are primarily geared towards qualified millennials without a credit history who want to build their credit score and accelerate their financial independence.