NEW YORK (Reuters) - LendingPoint, a U.S.-based online lender, has secured a debt facility of up to $500 million arranged by the investment banking and capital markets division of Guggenheim Partners.
The company said on Wednesday that it will use the funding to support its lending that targets consumers who may be overlooked by traditional lenders because they are considered too risky.
U.S. Bank is the note agent and paying agent for the credit facility and CBIZ MHM is the administrative agent, LendingPoint said. The facility, one of the largest raised by a balance sheet online lender this year, was closed at the end of August, the company said.
LendingPoint is among the group of young companies that seek to take advantage of new technologies to reduce the cost of lending.
In order to approve a wider set of people for loans, the company takes into account factors beyond traditional credit scores, including job history and income. FICO credit scores are, however, still taken into account.
While the online lending sector has been expanding over the past few years, it has been facing concerns from investors over the quality of loans. Online lenders often sell packages of the loans they issue to institutional investors.
Tom Burnside, co-founder and chief executive of LendingPoint, said in an interview that the size of the facility was a “testimony to the performance of our asset.”
Some of the decline in investor appetite across the sector has been caused by the inability of investors to accurately predict yields for the loans, according to Burnside.
“We have not found that to be a problem because we’ve had good predictability,” he said.
The company expects to have issued $400 million in consumer loans from its inception in 2015 until the end of this year.
Reporting by Anna Irrera; Editing by Leslie Adler