SoFi offers equity to tempt new partners

According to Mike Cagney, co-founder and chief executive, the advent of negative interest rates in Japan, in particular, has sparked interest in the high-yielding assets that SoFi is generating at the rate of about $1bn a month.“We’re hoping for meaningful, predictable, take-down of loans through a couple of large partners, while also raising some more equity capital,” he said.The San Francisco-based group is the biggest and most aggressive of the non-bank financial technology companies that have sprung up in the wake of the crisis, competing with the big brick-and-mortar banks on marketing, underwriting and other areas where traditional lenders have struggled to keep up. Last year, SoFi funded more than $5bn of loans — quadruple its total for 2014.But like many of the other 400 or so platforms across the US, SoFi is now running up against funding troubles. Online lenders lack the deposits needed to fund loans like a traditional bank, relying instead on institutions, hedge funds or individuals, to buy them. But wobbles in credit markets since the turn of the year have underlined the urgency of securing multiple sources of steady funds — even if it means giving up a share of profits.“What we have to do is to find alternatives to deposits,” said Mr Cagney, adding that he hoped to close the new equity round by late summer. “It is difficult to be originating $1bn-plus a month if you don’t know where those loans go.” Mr Cagney said the fundraising is likely to place a higher valuation on the group than the last one, which was estimated to value SoFi at about $4bn. Such fundraisings — known as “up-rounds” — are becoming less common in fintech, as institutions become choosier about which platforms to back.“