Elevate, based in Fort Worth, Texas, focuses on providing credit to non-prime
borrowers. It has a product called Rise that lets subprime customers take
out loans directly from its website, rather than visiting payday lenders,
where rates are much higher.
The bigger growth opportunity, however, is in powering consumer lending
for banks that are struggling to lure new customers in a digital world.
Elevate's
Elastic product does just that, enabling financial institutions to offer credit
lines of up to $3,500 for customers that lack pristine credit histories.
For now, Republic Bank is the exclusive issuer of the credit line, but
Rees said that there's plenty of interest from other institutions
and that more partnerships will be announced in 2017.
"Banks are terrible at lending outside of their branch footprint,"
Rees said. "And banks are not good at customer acquisition. We provide
products and a set of underwriting tools that fits for non-prime customers."
Elevate has about 500 employees, including a tech-heavy office in San Diego.
The company employs three-dozen data scientists.
Revenue last year jumped 59 percent to $434 million, and the company recorded
gross profit of $125 million.
But Elevate still faces a marketing and public relations challenge. As
a non-prime lender, the company's interest rates look quite high relative
to mortgages, auto loans and even credit cards that prime borrowers typically see.
For its Rise product, annualized interest rates range from 36 percent to
360 percent. Elastic brings with it a 5 percent cash advance charge and
then an additional monthly charge on the unpaid balance, equaling an effective
average annual percentage rate of 85 percent, according to Elevate's
updated IPO
prospectus.
But as customers pay down their debt in a timely fashion, the rate falls.
"We get people started at a rate better than a payday loan, and we're
driving that rate down over time," Rees said.
Ari Levy, "Online subprime lender Elevate looks to expand as it awaits
IPO window" CNBC.com, October 26, 2016. Accessed via: http://www.cnbc.com/2016/10/26/online-subprime-lender-elevate-looks-to-expand-as-it-awaits-ipo-window.html