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Los Angeles based big data online lender ZestFinance has raised $150m of debt financing from New York's Fortress Group. The financing will enable Zest to expand its new lending arm, Basix, which launched in July and is aimed at borrowers with middling credit----targeting those who might not qualify for a loan from popular online lenders such as Prosper or SoFi. Former Google CIO and ZestFinance founder, Merrill, recognizes that the investment is an important vote of confidence for the online lender from a large institution.
Given that Google’s former information head is a relative, Merrill’s sister-in-law was obviously able to secure funds from a family member. But not every sub-prime borrower is so lucky, Merrill realized, and so ZestFinance initially launched as a lending platform to compete directly with the payday lenders of the world. And those loans aren’t cheap. ZestFinance prices for risk like any rational lender, and that means APRs that are triple-digit. “We are an expensive loan compared to credit cards or what you can get from your family,” he said. “The problem is not everyone can get credit cards or can borrow money from their family.” And, in the last three months, the firm has also moved past focusing on sub-prime borrowers exclusively to include a group it is defining: almost-prime or near-prime borrowers.
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