- 1SoFi agreed terms on a three-year, $3B agreement with BasePoint Capital for SMB loans.
- 2Another undisclosed party is working with it on several hundred million dollars.
- 3CEO Anthony Noto says SoFi can price meaningfully below the 30%+ rates he says most SMB lenders charge.
SoFi has signed up capital for its new small business loan product. CFO Chris Lapointe said on the Q2 earnings call that SoFi has agreed to terms on a three-year, $3 billion agreement with BasePoint Capital, and that another undisclosed party is working with the company on several hundred million dollars more.
A new line of business
SoFi announced its move into direct business loan origination about a month earlier, after years of referring customers to other providers through a platform it built. Small business lending came up repeatedly during the call.
The pricing argument
CEO Anthony Noto said the company thinks it can be very competitive in SMB, as it has been in personal loans and credit cards. In his words, most SMB lenders charge "exorbitant rates of over 30%," and SoFi believes it can price meaningfully lower and take significant share.
Where the idea came from
Noto said a large share of SoFi's members run small businesses. During COVID, when the government offered PPP loans, SoFi saw heavy demand for applications even though it was not in the SMB business. It set up an application process that met government criteria and passed the demand to lenders. It then built a marketplace so that it is paid for referrals.
Noto called SMB synergistic with the rest of the business, one more way for an individual to meet borrowing needs. He said SoFi will follow it with checking and savings for small businesses and other ancillary products, adding to the company's flywheel.
Source reporting: deBanked.
