SoFi (Social Finance Inc.)

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Social Finance Inc (SoFi)
Type Private
Industry Student loans
Founded May 2011 (2011-05)
Headquarters San Francisco, California
Key people Mike Cagney (CEO)
Nino Fanlo (CFO)
Products Student loans
Website sofi.com

Social Finance, Inc. (commonly known as SoFi) is an online, peer-to-peer loan platform that connects students and recent graduates with alumni and institutional investors via school specific student loan funds. The company is a non-bank lender focused on refinancing student loans at lower rates than traditional repayment options.

Overview[edit]

SoFi was founded in 2011 by Mike Cagney, Dan Macklin, James Finnigan, and Ian Brady, four students who met at the Stanford Graduate School of Business. By leveraging the interest fellow alumni have in seeing graduates of their alma mater be successful, the founders hoped SoFi could provide more affordable options for those taking on debt to fund their education.[1] The company’s inaugural loan program was a $2 million pilot at the founders’ alma mater – the Stanford Graduate School of Business. For this pilot, 40 alumni invested an average of $50,000 to 100 students.[2][3][4]

In September 2012, SoFi raised $77.2 million, led by Baseline Ventures, with participation from DCM and Renren.[5][6]

On October 2, 2013, SoFi announced that it had raised $500 million in debt and equity to fund and refinance student loans. This total funding amount came from $90 million in equity, $151 million in debt, and $200 million in bank participations, with the remaining capital from alumni and community investors.[7] The $151 million in debt includes a $60 million line of credit from Morgan Stanley, and a $41 line of credit from Bancorp.[8][9][10]

As of September 2013, SoFi had funded $200 million in loans to 2500 borrowers at the company’s 100 eligible schools.[11]

In November 2013, SoFi announced a deal with Barclays and Morgan Stanley to create a bond backed by peer-to-peer student loans, and this would create the first securitization of these loans to receive a credit rating.[12]

In April 2014, SoFi raised $80 million in a Series C round led by Discovery Capital Management with participation from Peter Thiel, Wicklow Capital, and existing investors. Money was raised to expand the footprint of the company's student loan refinancing business and to extend into new products like mortgages and personal loans.[13]

Model[edit]

SoFi utilizes an alumni-funded lending model that connects students and recent graduates with alumni and institutional investors via school specific student loan funds.[14] Investors receive a financial return and borrowers receive rates lower than the federal government. The company seeks to minimize defaults by focusing on low-risk students and graduates.[15]

According to SoFi, graduates refinancing with the company can save up to $26,700 if switching from a 10-year loan with a weighted average rate of 7.67% to SoFi’s best 10-year rate of 5.49%.[16] In addition to financial benefits, borrowers gain access to career development experts, support and mentorship when starting a company, and a community of individuals invested in their success.[17][18]

References[edit]

  1. ^ "SoFi Tapping Alumni to Help With Student Loans". The New York Times. 3 April 2012. 
  2. ^ "SoFi Tapping Alumni to Help With Student Loans". The New York Times. 3 April 2012. 
  3. ^ "SoFi’s New Take on $1 Trillion Student Loan Market". Forbes. 2 April 2012. 
  4. ^ "Student Loans: For a Great Deal, Borrow from Alumni". Time. 2 April 2012. 
  5. ^ "Social Finance Lands $77M From Baseline, Renren To Help Solve The Student Debt Crisis". TechCrunch. 11 September 2012. 
  6. ^ "Student-Loan Online Start-Up Gets Financing". The Wall Street Journal. 11 September 2012. 
  7. ^ "SoFi raises $500M to fix the broken student loan market". VentureBeat. 2 October 2013. 
  8. ^ "SoFi Gets $60M in Loan Funding from Morgan Stanley". American Banker. 26 March 2013. 
  9. ^ "MBA Lender seeks to securitize student debt". The Financial Times. 26 March 2013. 
  10. ^ "SoFi gets an additional $41M to keep students from falling into debt". 4 June 2013. 
  11. ^ [(http://www.lendacademy.com/sofi-adding-leverage-for-their-alumni-investors/ "SoFi Adding Leverage For Their Alumni Investors"]. Lend Academy. 24 September 2013. 
  12. ^ "Barclays Helps Startup Structure First Rated P2P Bond". Bloomberg. 14 November 2013. 
  13. ^ "SoFi $80m fundraising paves way for growth beyond student loans". The Financial Times. 3 April 2014. 
  14. ^ "A new way to crowdsource your student loans". MSN Money. 26 July 2013. 
  15. ^ "Harvard Graduates Targeted by Alumni-Backed Loan Funds". Bloomberg. 11 December 2012. 
  16. ^ "Double Take: When to Consider Refinancing Your Student Loans". SoFi. 22 October 2013. 
  17. ^ "A new way to crowdsource your student loans". MSN Money. 26 July 2013. 
  18. ^ [(http://www.lendacademy.com/sofi-adding-leverage-for-their-alumni-investors/ "SoFi Adding Leverage For Their Alumni Investors"]. Lend Academy. 24 September 2013. 

External links[edit]