SoLo Funds Aims to Disrupt Payday Lending with $10 Million Funding

SoLo Funds is working to establish a community-focused lending alternative to traditional payday lenders. The company has recently secured $10 million in funding to facilitate expansion across the United States.

The Problem with Payday Loans

Payday lenders typically provide short-term, high-interest loans to individuals facing financial hardship. These loan terms frequently result in a damaging debt cycle for borrowers.

A significant portion – approximately 80% – of the American population lacks sufficient savings to cover unexpected expenses. This vulnerability has fueled the profitability of the payday lending industry.

SoLo Funds: A Different Approach

In recent years, platforms like GoFundMe have emerged, allowing individuals to solicit donations for personal needs. SoLo Funds functions as a distinct alternative within this landscape.

It operates as a marketplace where borrowers can define their loan repayment conditions. Simultaneously, lenders can generate income while providing support to those requiring financial assistance.

Rapid Growth and Performance

According to CEO and co-founder Travis Holoway, the company currently facilitates tens of thousands of loans each month. Loan volumes are experiencing a monthly growth rate of around 40%.

While the precise book value of loans processed through the platform remains undisclosed, Holoway reports that the company’s default and delinquency rates are demonstrably lower than those of its competitors.

“Our default rate is approximately three times better than the industry average,” Holoway stated, referencing the payday lending sector they are aiming to transform.

Mitigating Risk with Insurance

SoLo Funds also provides a default insurance product that lenders can purchase. This insurance serves as a safeguard against potential losses.

Introduced in April of the previous year, this service contributed to the company’s remarkable 2,000% growth throughout 2020.

Geographic Hotspots

The platform has seen the highest levels of activity in states with large populations and major metropolitan areas, including Texas, Illinois, California, and New York.

“Our borrowers are school teachers… are social workers,” Holoway explained. “Individuals residing in cities with higher living costs are more susceptible to financial shocks compared to those in areas like Dayton, Ohio.”

Unexpected Lender Demographics

The borrower base represents a diverse cross-section of the American population. However, the lender demographics are somewhat surprising.

Roughly half of the loans are funded by what Holoway terms “power lenders,” with the remainder originating from less frequent users.

“A majority of [power lenders] are college educated and tend to be white men,” Holoway noted. “These are individuals earning between $100,000 and $125,000 annually, seeking to diversify their capital and generate returns while assisting others with essential expenses like groceries, rent, and transportation.”

Investor Confidence

The company’s growth trajectory has attracted investment from firms such as ACME Capital, Impact America Fund, Techstars, Endeavor Catalyst, and CEAS Investments.

Existing investors, including West Ventures, Taavet Hinrikus of TransferWise, Jewel Burks Solomon of Google Startups, Zachary Bookman of OpenGov, and Richelieu Dennis of Essence Ventures, also participated in this funding round.

A Vision for Financial Empowerment

“For too long, there have been limited options for individuals in need of immediate funds due to unforeseen circumstances,” Holoway said. “SoLo was created to offer safe, affordable options for borrowers that need cash quickly, while also creating a marketplace for lenders to grow capital and help community members in need.”

Holoway believes that people are inherently honest and generous, and the platform’s growth validates the desire to positively impact the world.