LendUp Raises $47.5M To Expand Subprime Lending

In one move to upset the mainstream financial apple cart, startup LendUp Global is taking a new twist on the credit card.

The Wall Street Journal reported on Monday (Aug. 22) that LendUp has raised $47.5 million in equity financing that has, at its root, the ambition to boost the credit card business. The latest fundraising values LendUp at $500 million, WSJ reported, citing several unnamed sources. The new round of equity financing was led by YC Continuity, a venture capital fund of Y Combinator.

In its effort to debut a card geared toward subprime borrowers, said WSJ, the firm is going into competition in a mass market that is dominated by Capital One and others. The credit card via LendUp comes as an expansion of the L Card that was launched last year. The four-year-old startup has its DNA in small-dollar loans with high interest rates. However, it does not roll those payday loans into new loans and, as the firm has noted, offers better terms as people gain traction with on-time repayments. These segments — for both the credit card and for the smaller-dollar loans — are underserved by traditional, larger lenders, said LendUp. The lending limits on the L Card, thus far, sit in the $300–$1,000 range, with annual percentage rates of 19–29 percent, in addition to annual fees.

In 2016, cumulatively, LendUp has raised $200 million. That tally includes a $100 million credit facility from Victory Park Capital, which enables LendUp to hold the credit card loans that will be extended on its own books, with cash flow to accrue directly to the firm. WSJ noted that early LendUp backers include firms such as QED Investors and Kleiner Perkins Caufield & Byers.