How One Lender Hooks Millennials

The thought of getting a call from the bank that lent out a student or car loan might ring of nightmares to many but not from a new player in the alt-lending space that calls its mostly millennial borrowers to munch on cheeseburgers and vodka-cucumber cocktails.

The meetup — one of 45 this year — is a tactic that is a far cry from the methods of uptight traditional banks that are quickly losing meaning to the attending millennials, who are instead choosing to borrow from Social Finance (SoFi), a San Francisco-based alt-lender that promises its borrowers more than just money.

“I never expected an event from a lender to call me and say, ‘Come hang out with us; we are building community,’ ” said Azdar Baghirov, an IT system administrator, in an interview with Bloomberg. “Honestly, this is unbelievable.”

The borrowers at the event are not just snacking on free food but are hobnobbing with potential investors and networking in an unconventional creative environment that SoFi is trying to foster as a lender.

SoFi, which was founded in 2011, has so far lent and refinanced $6 billion in loans. With 85,000 “members,” the company has caught the interest of many investors wanting to buy bonds backed by portions of the billions of dollars it has lent out, Bloomberg reported. In September this year, the company raised $1 billion in its latest funding round led by Japanese Internet and telco company SoftBank.

With its growing size and increasing products, SoFi, as Bloomberg pointed out, risks turning itself into a bank, but Mike Cagney, SoFi’s CEO and cofounder, quavers at even the thought of it. “I don’t like to use the word ‘banking,’ ” he told Bloomberg. “It just perpetuates the need for those things to exist.”

And Cagney’s efforts to keep SoFi a non-traditional lender are reflected in its approach towards its borrowers. When its borrowers want to start a business, it helps connect them to venture capitalists and even gives them a six-month break before they start to make payments. When its customers are out of a job, it goes so far as to help them land interviews with potential businesses and, of course, puts a stop on their loan payments temporarily — unlike banks handing overdue cases to credit collectors and quickly processing foreclosures.

Cagney reportedly has even hired Sullivan & Cromwell Senior Chairman H. Rodgin Cohen, a Wall Street banking lawyer, to make sure the company works in parameters that keep it out of the reach of federal regulators.

And so far, SoFi’s approach seems to be working. Not only did the company turn profitable last year, its community-building efforts are now bearing fruit. Its members are now taking the initiative to organize networking meetups and make Facebook groups for staying in touch with other members.