The company is working with investment banks Goldman Sachs and Morgan Stanley on an IPO that could value the business at around $1 billion. Oportun makes loans to people who have limited or no formal credit history, such as a FICO credit score, but the company believes are still creditworthy. The company was founded in 2005 and since then has made $1.5 billion in loans to more than 500,000 borrowers.
Oportun makes some of its loans online, and focuses on the technology that underpins its decision making process, but unlike most other platforms it has 140 branches in California, Texas and Illinois.
The company offers loans between $500 and $5,000 and charges an average annual rate of 36% to borrowers. This may seem steep but Oportun says that this is a good deal compared to the interest rates of 500% that are typical for payday loans that is another option for people without credit histories.
In January Oportun completed its third securitization and in February the platform made a deal to sell $70 million worth of loans directly to Ellington Financial LLC, a specialty finance company. The business has also recently changed its name from Progreso Financiero to Oportun.
Oportun’s model is in some ways similar to the mortgage lender Privlo. Privlo uses hundreds of extra data points, compared to traditional lenders, including individual career factors and a wide array of documents to assess a borrowers creditworthiness. Privlo focuses on lending to small business owners and self-employed workers; retirees with significant assets but lacking a regular income, credit rebuilders who have had a single negative credit event, and those with a limited credit history, e.g. foreign nationals with work visas.
OnDeck and Lending Club paved the way for alternative finance platforms floating when they went to market last year. We are waiting to see which platforms will follow them this year. There have been many whispers that SoFi will float this year but no confirmation. We will keep watching for any developments in this space.