Not yet a toddler, the three month old loan service Basix has hit some enviable milestones. California-based online lending startup, ZestFinance, has secured a $150 million debt financing deal with global investment giant Fortress Investment Group for Basix. Founded in 2009 by former Google CIO Douglas Merrill, ZestFinance deploys data analysis and machine learning for credit scoring to enable lenders to accurately gauge prospective borrowers, using tens of thousands of data points, including personal spending habits and social media, to assess a borrower’s ability to repay loans.
“ZestFinance was founded to make fair and transparent credit available to everyone, especially those left out of traditional credit systems,” said Douglas Merrill, Founder & CEO of ZestFinance when Basix launched in July. “Basix will serve regular, hard-working people whose credit scores are just below levels that would allow them to qualify for a bank loan — tens of millions of Americans. Our customers are middle-class Americans who have insufficient credit histories or have weathered a financially-draining life event and are building or rebuilding their credit.”
The company targets people who, while being good borrowers, are traditionally overlooked by banks because they fall short of their loan eligibility criteria (see embedded TEDtalk below). Basix aims to make loans available to people with credit scores just below levels that would make them eligible for loans from traditional banking structures. According to a release, Basix also offers borrowers a 15-day grace period to give borrowers a better opportunity to make on time payments. Initially, Basix loans ranged from $3,000 to $5,000 and will be available in the near-term in Alabama, Georgia, Missouri, New Mexico, South Dakota, and Utah. Later this year, Basix aims to be available nationwide the startup noted in July. Borrowers can improve their credit by making their payments on time and repaying their Basix loans. ZestFinance will report Basix borrower payment performance to credit reporting agencies, helping responsible borrowers improve their credit history over time. Basix offers an easy-to-use online application, upfront pricing, low monthly payments, and the flexibility to save money by paying back early, according to the platform.
Basix service is based on ZestFinance’s underwriting technology that allows assessment of an individual’s repayment ability by going beyond a traditional bank’s ten to fifteen point evaluation, according to the release. The near-prime consumer market is challenging for lenders to serve because it is difficult to determine credit-risk using traditional underwriting methods. Instead of analyzing the limited number of credit variables most traditional underwriting methods consider, ZestFinance’s machine-learning based credit-decisioning technology analyzes tens of thousands of data points to effectively evaluate creditworthiness.
ZestFinance will utilize funding from Fortress to grow its Basix consumer loans. In addition to Basix which targets the near-prime consumer market, the platform’s emergency loan service ZestCash targets subprime borrowers. ZestFinance claims that it has issued thousands of loans worth millions of dollars to date, is profitable and is doubling its revenue annually. In June, ZestFinance signed a deal with one of China’s largest e-commerce companies, JD.com, to launch a joint venture called JD-ZestFinance Gaia.
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