During times of need, people will often turn to friends or family for financial support. Rodney Williams and Travis Holoway were those friends. Even from a relatively young age, the two were some of the most successful people in their families and among their friend groups. This meant people often turned to them when they needed support. And while they were happy to help out, they noticed this trend was indicative of a larger problem.
Eighty percent of Americans are living paycheck-to-paycheck and 40 percent of Americans would struggle to pay off a surprise $400 expense. As a result, a lot of people may need to borrow a couple hundred dollars when money is especially tight.
Financial institutions have spotted this need, but their response has been to provide payday loans with predatory terms — things like strict delinquency policies or high interest rates. Williams and Holoway weren’t able to find an institution that was willing to provide a loan for less than $1,000 without predatory loan tactics. That is, until they created their own.
In 2018, the pair founded SoLo Funds, creating a peer-to-peer lending marketplace for short-term, small-dollar loans.
On Wednesday, SoLo Funds announced that it raised $10 million in its Series A funding round. ACME Capital led the round, which brings the company’s total funding to $12 million since inception.
People can sign up for SoLo in minutes by providing a few pieces of information. From there, they can choose whether they want to borrow money or lend money. Borrowers will set their own terms, stating how much they want to borrow, a reason for the loan and how quickly they can pay it back. On the other side, lenders are able to see all the borrower requests and decide if they want to use their spare cash to fulfill those requests. Lenders also make interest on those loans, giving them a financial incentive.
SoLo’s average loan size is about $200, and the loans are usually paid back in about 15 days. The average lender return is between 3 and 10 percent, and SoLo says its delinquency rates are about 3x lower than the industry average. Part of this has to do with the SoLo Score, which uses technology and data to show how likely a borrower is to pay someone back promptly, and SoLo Lender Protection to give lenders loan insurance for a small fee.
But the benefits for individual lenders are more than just the returns, it’s knowing that the money they lent out actually made a tangible difference in someone’s life.
“The individual lender is not giving their capital to SoLo the institution,” Holoway told Built In. “Each individual lender finds each borrower that they’re going to deploy capital to, and they know exactly where their money is going. And the borrower knows where that money is coming from. It’s really a personal experience and it’s really proving that the world is much more empathetic we’re led to believe.”
Holoway emphasizes that, sometimes, the demographics of borrower and lender overlap. He told Built In that one user of SoLo was an engineer who was laid off from his job and needed money to fund his move. He got a loan through SoLo, paid it back and, once he was able to fully get on his feet again, he signed up to be a lender on the platform and began financing loans with his own money. This creates an experience that’s a lot more personal than owing money to a financial institution, he added.
This recent funding round will provide a jumping off point for SoLo. The company has processed over 100,000 loans for over 300,000 users, and this new capital will allow the company to expand even further. SoLo will invest the funds into building on its product and growing its team. The company currently has 26 employees, but it’s looking to hire around 24 people in the next 6-12 months — essentially doubling the size of the team. The company is looking specifically to expand its engineering and data teams, but it also plans to hire for product and marketing as well.
SoLo is looking forward to this growth, and sees opportunity growing within the LA tech ecosystem.
“Being in LA, has been a game changer for us,” Holoway said. “We moved to LA in January of 2019, and the talent that we’ve been able to acquire has really propelled us forward. We’re really excited to be doubling down on that as we look at growing our team over the next year.”
He continued: “I think that there’s something really special that’s happening in LA tech. We’re just really excited to be a part of that story.”
