Fig Loans has just completed a $2.6 million seed round for its service that offers a payday loan alternative.
The New York City-based company raised the funding from Access Ventures, Arrow Venture Partners, Tubergen Ventures, and Village Capital. Bizible co-founder Aaron Bird; Remitly co-founder Shivaas Gulati; and Wharton professor Peter Fader also invested.
Founded in 2015 and a 2016 graduate of the Techstars Seattle accelerator, Fig Loans provides “installment loans” for low-income Americans. It offers a lower APR and fewer monthly payments than what is available from traditional payday loans. The idea is to help people re-enter the traditional credit markets.
Fig Loans is piloting its product in Texas with the United Way, Catholic Charities, and Memorial Assistance Ministries. Customers use Fig Loans to help pay for parking tickets; car registration; an occupational drivers license; health insurance deductibles; etc.
Fig Loans generates profit by making referrals to traditional credit partners like local credit unions or Capital One. Revenue from the loans are meant to cover the cost of operating the company.
“This business model creates our mission alignment,” said Fig Loans CEO Jeff Zhou. “In other words, the higher the credit score we help our customers obtain, the more valuable our customers are to a traditional credit partner.”
Zhou and his co-founder John Li came up with the idea for Fig Loans after meeting at The Wharton School. The startup employs six people and will use the fresh funding to help launch its newest product, Fig36, a turnkey lending-as-a-service platform for non-profits. Zhou called it the world’s first private-public partnership lending program.
“The tech industry is often criticized for solving trivial problems or catering to the 1 percent,” Techstars Seattle Managing Director Chris Devore said in a statement. “I’m incredibly proud of Fig Loans — like their Techstars Seattle predecessor Remitly — for using technology to tackle one of our most important social problems: helping those at the bottom of the income scale save money and accelerate their climb into the middle class.”