Backed Raises $1.5M

By Guglielmo de Stefano on Monday 14 December 2015

Alternative Lending

New online platform enables “millennials” to build their credit score.

New York based digital lending platform Backed has announced a $1,5m raise. The seed funding comes from a number of angel investors, iAngels, and Cyhawk Ventures. The company plans to allocate about half of the funds to further developing the product, team and company, and half to customer acquisition and revenue growth.

Founded in 2014, Backed provides young borrowers, referred as “millennials”, with accessible loan products to launch their financial independence and build their credit score. According to the company, the percentage of young graduates – also dubbed “the Boomerang Generation” – moving back home after the completion of their studies has grown from 22% to 26% in the past five years. Furthermore, 63% of “millennials” are without a credit card. These figures paint a picture of a generation that is struggling to attain financial independence.

Backed aims to reverse these trends by offering a disruptive product, said to be a complete departure from traditional co-signing. Through the platform, “millennials” may be backed by parents, friends or anyone willing to effectively guarantee covering their loan repayment in case of missed payments. In other words, backers “lend” their credit scores to youngsters, thus helping them access credit at generally better rates.

Co-CEO and founder George Popescu commented:

"Most existing lenders don't have the capability to properly estimate the default risk of millennials and hence more than 86% are declined or overcharged around 20%+ APR. Our platform enables parents, or 'Backers,' to effectively lend their credit history to their children in exchange for lower rates.”

The Backed service aims to be different from traditional co-signing solutions in three major aspects. Firstly, parents get notified within a few seconds if a payment is missed, while traditionally they are notified only in the instance of default. Secondly, borrowers have a 15 day grace period to make good on only the missing amount. Thirdly, Backed suggests that, during the grace period, neither the backer nor the borrower's credit scores are affected.

Gilad Woltsovitch added:

"Parents might wonder how 'Backing' is different than traditional co-signing. Traditional lenders are incentivized to notify co-signers only after a loan has defaulted, so that they can profit from accumulated fees, penalties, and accrued interest. Our progressive form of co-signing, known as 'Backing,' immediately notifies parents of any payment shortfall prior to default, and provides a 15 day grace period, in which neither the Backer nor borrower's credit score will be affected."

The platform aims to become profitable within a few years and will begin accepting loan applications in NY, NJ, and FL immediately.

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