Credit card company Petal is reportedly seeking a buyer amid doubts about its viability.
The company, which provides cards for consumers who are new to credit, is exploring a number of options following several months of struggle, Fortune Magazine reported Sunday (Nov. 19), citing five sources from the private equity, banking and venture capital (VC) sectors.
Some of these sources say Petal is expected to go out of business if it doesn’t find a buyer, while others say that outcome is unlikely.
“Petal has received multiple acquisition offers,” said one source close to the process, describing it as a question of who will purchase the company, not if.
Even if no buyer emerges, this source added, Petal still has options, thanks to the $55 million leftover from a funding round earlier this year, as well as its ability to draw liquidity from loan agreements. Its investors are also willing to offer more funding, the source said.
A spokesperson for Petal declined to comment when reached by PYMNTS.
As Fortune noted, high interest rates have hurt consumer lenders such us Petal this year as the cost of borrowing has grown.
And as covered here, the third quarter of this year saw private investment in FinTechs fall by 46% compared to the same period in 2022, with the number of deals falling to 2017 levels.
“The cost of capital has been much higher given the macro rate environment, and this puts pressure on lenders’ P&Ls,” one VC said.
According to the Fortune report, Petal has conducted two rounds of job cuts, eliminating 20% of its positions in June. It now has about 100 employees, with only business-critical workers left, one former staff member told Fortune.
“They have been struggling for a while,” one of the VC sources told the magazine.
Petal in August announced it had secured a $200 million debt facility to help aid its goal of issuing cards to users who are “new to credit” without needing credit scores to qualify.
The company said at the time that nearly 400,000 consumers had been approved for Petal credit cards, including more than 100,000 new cards OK’d last year.
“It will soon be possible for any U.S. consumer to use their banking history to qualify for new and better financial services,” said Petal Co-Founder and CEO Jason Rosen. “That’s great for consumers, and an opportunity for Petal to make credit accessible to millions of people who have been overlooked and underserved for too long.”