Critical.
Authoritative.
Strategic.
Subscribe to CIO Magazine »

ZestCash closes $73 million in funding

ZestCash, which offers short-term loans online, plans to grow its staff, expand its operations and boost its lending capacity

ZestCash, a startup that aims to disrupt the "payday" loans market with new search and data analysis techniques for underwriting loans, has closed a US$73 million round of funding.

ZestCash raised $23 million in an equity round led by Matrix Partners, and a separate $50 million line of debt financing from Victory Park Capital, the company plans to announce on Thursday. It's ZestCash's second funding round.

Traditional "payday" lenders offer small, short-term loans to borrowers who are known as underbanked, because they can't get loans from banks and other conventional lending institutions due to bad credit or low cash reserves. ZestCash is going after these borrowers by offering loans that it says are less costly and more convenient.

According to the company, it can lower costs and offer better terms because its underwriting process is sharper, due to a proprietary system that lets it do deeper and broader collection and analysis of applicants' credit-related data. That way, it has a better view of the default risk for each applicant than the average "payday" lender, said ZestCash CEO Douglas Merrill. The company also operates entirely online.

ZestCash plans to use the new funding to grow its business, including hiring more engineers and expanding its operations to new U.S. states, while the line of debt will beef up its lending capacity, Merrill said.

"We're ready to put the foot on the gas," he said. The company has about 75 employees.

ZestCash lends money to customers in Utah, Idaho, South Dakota and Missouri, and plans to expand in the coming months to other states that Merrill declined to name because the plans are still being worked on.

While payday loans must typically be paid back within two weeks, ZestCash lends money for a longer term, usually between three months and eight months, and it is flexible with late payments. Loans can cost borrowers half as much as a typical payday loan from another vendor, according to the company, but it still charges very high interest rates -- 180 percent on average, up to a maximum of 300 percent.

ZestCash expects to exceed the 10,000 customer mark this quarter. It has lent several millions of dollars so far. About two-thirds of its customers have come back to do business with ZestCash again, according to Merrill.

Juan Carlos Perez covers search, social media, online advertising, e-commerce, web application development, enterprise cloud collaboration suites and general technology breaking news for The IDG News Service. Follow Juan on Twitter at @JuanCPerezIDG.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

More about: IDG, Matrix Partners
References show all

Comments

Post new comment

The content of this field is kept private and will not be shown publicly.
Users posting comments agree to the CIO comments policy.
Login or register to link comments to your user profile, or you may also post a comment without being logged in.
Related Coverage
Related Whitepapers
Latest Stories
Community Comments
Tags: e-commerce, internet, ZestCash
Latest Blog Posts
Whitepapers
  • Security Threat Report 2012
    This threat report shares the latest research on hacktivism, online threats, mobile malware, cloud computing, and social network security looking ahead to the coming year.
    Learn more »
  • How progressive companies are using social technologies
    Social networks and collaborative technologies are now commonplace in many workplaces. Having first been used “on the quiet” by highly-networked employees, in increasing numbers they are now being proactively used by businesses keen to connect more effectively with their internal and external audiences. Web collaboration is now viewed as critical to company success and as having multiple benefits and applications to the business. Read on.
    Learn more »
  • Webcast: Innovation Driving UC Everywhere: From Mobile to the Cloud and Beyond
    Polycom announced it is acquiring HP's Visual Collaboration Business Unit, including HP's Halo products and Managed Services, and the two companies have entered into a deep strategic agreement through which Polycom will become HP's exclusive partner for telepresence and video UC solutions. This will create an end-to-end UC solution that will deliver to our joint customers an unparalleled user experience, interoperability, investment protection, and ease of deployment. Watch this webcast.
    Learn more »
All whitepapers
rhs_login_lockGet exclusive access to Invitation only events CIO, reports & analysis.
Recent comments