SoFi, the leading online student loan lender, recently launched an investment fund to give investors access to its loan portfolio, marking its first foray into this area.
In a Securities and Exchange Commission filing from last month, Sofi disclosed that it raised $105 million for its SoFi Prime Income Fund which counts 33 people as investors. Each investor contributed a minimum of at least $500,000. SoFi didn’t disclose the investors in the filing.
In an interview with CNBC at the time, SoFi’s Chief Financial Officer (CFO), Nino Fanlo, said that this was the first time the San Francisco online lender created a fund. He asserted that it was another way for SoFi to raise capital for issuing new loans to borrowers. “It’s a way to get broad exposure at market price. You get the opportunity to participate in a broad swath of transactions,” the CFO said. Fanlo noted that returns from the investment after fees will likely be in the low double digit range.
The move by SoFi to open up its loans to more investors comes at a time when business is booming for the fintech industry which is expanding into new markets. Earlier this year, SoFi received a mortgage license to operate in New York; additionally, it acquired Zenbanx Holding, a startup fintech that provides online and mobile banking accounts in different currencies and enables customers to transfer money across the globe. It’s also expanding internationally with the Financial Review. During January, SoFi was gearing up to take on traditional mortgage lenders in Australia, and it was even advertising on LinkedIn for a mortgage operations manager for an office in Sydney. This move would mark the first office that SoFi opened up outside of the U.S.
SoFi is even attempting to disrupt the investing world, offering people fee-free investing for the first $10,000 invested and 0.25 percent fee per year afterwards. Moving on to insurance, SoFi teamed up with Protective Life to provide customers with term life insurance, boasting a twenty-minute process to get coverage.
Of the online student loan lenders, SoFi is by far the largest. To date, it has funded $18 billion in loans, has 275,000 members, and claims to have saved consumers a combined $1.45 billion in lower interest rate loans. According to CrunchBase, it has raised $1.88 billion in seven rounds of fund raising with participation from 23 investors since its inception in 2011. Unlike traditional lenders, SoFi uses different data points to underwrite its loans including career experience, monthly income versus expenses, financial and educational history. It’s among a crop of fintech startups that have been turning traditional financial services on its head whether it’s lending, banking, or investing.
Author: Donna Fuscaldo
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