Student lending company SoFi is nearing its goal of raising a new round of funding as much as $75 million, says two investors familiar with its plans. The San Francisco ? based lending company is one of the new generation of lending services backed by venture investors providing assistance to debtors in managing their student loan obligations reaching nearly $1.2 trillion. This debt burden is currently breaking the financial backbone of America?s graduates.
Social Finance or SoFi, which was founded by Wells Fargo prop trading head Mike Cagney, was able to raise $77 million in its last round of funding way back in 2012. The funding came from Chinese social network Renren, DCM and Baseline Ventures. Investors say that SoFi will close a new round of money between $50 million and $75 million.
In 2011, the company raised its initial financing of $4 million Series A funding. Companies that participated in the venture investing included Innovation Endeavors and Baseline Ventures. Social Finance has been adept in borrowing funds from credit markets, having raised $152 million in a securitized loan offering that closed in 2013.
One good reason why SoFi is good at tapping both debt and equity lenders is because of how the company vets its borrowers. SoFi lends money to students from schools that have low default rates. An article in LendAcademy reported that the company also refinances students at rates that commensurate their credit risk.
A typical borrower is usually 28 ? 31 years old with an average FICO of 740 and an annual salary higher than $125, 000. This is why SoFi undercuts rates offered by an existing student loan program since it?picks from a prime pool of borrowers, than lending to every student in the country.
SoFi now has $400 million of outstanding loans with 4, 500 borrowers. The company is on track to lend over $1 billion before the year ends with 10, 000 more borrowers. Companies like SimpleTuition and Student Loan Hero are offering tools to help students get out of debt. However, no one seems to have gathered the capital that SoFi brings to the market.