ImpactAlpha, June 12 – The majority of Americans live paycheck to paycheck. When confronted with emergency expenses, the only option for many is a predatory payday loan.
Los Angeles-based Sunbit is providing an alternative: lower-cost short-term loans for “non-discretionary” expenses, like car repairs, textbooks, or pets’ vets costs. The company has raised a $26 million Series B funding round led by venture capital firm Zeev Ventures.
Sunbit partners with merchants to do point-of-sales financing with nothing more than a customer’s driver’s license, phone number and email address. Customers can be approved for financing in minutes with the company’s credit underwriting process. Sunbit approves about 90% of applicants, including those with slim credit files. The highest interest rate it offers is 35.99% APR, which is hundreds of percentage points below a typical payday loan rate, Sunbit’s founder Arad Levertov told ImpactAlpha.
Levertov launched the company in 2016 after himself struggling to get approved for a credit card as an immigrant to the U.S. Levertov says Sunbit’s underwriting model focuses a lot on factors dealing with behavioral economics and customers’ willingness to pay. “We look at rational behavior in the model. If you have a good FICO score, but are delinquent on your AT&T bill for $50, we take that into account,” he explains.
The company spent a year testing its model in the Los Angeles area, before rolling out across California, and now with merchants in 40 states. Its average financing transaction is for about $500, repaid over a year or less. Its customers are roughly split between prime/near-prime borrowers and sub-prime or slim-credit borrowers.
On the merchant side, Sunbit partners with certified auto service centers; dental, eyewear and veterinary service providers; and university textbook and electronics sellers. Levertov says the company undertakes an extensive due diligence process before signing new partnerships to ensure they treat and charge customers fairly.
“When everyone else [in fintech] is going online, the majority of people still need to do non-discretionary services in brick and mortar shops, and the [financial] services there are stuck in the 1980s,” Levertov said.