Since the economic downturn of 2008, the lending industry has undergone a sea change of sorts, as established banks rethink their lending practices, as well as who receives the loans. While payday lending is seeing disruption by companies like SimpleFi, high-end pawnbroking is also experiencing a sea change of sorts by companies like Borro Banks, which has just completed a $19 million Series E funding round, according to The Wall Street Journal.
Borro Banks is an online luxury pawn shop based in New York and London. Although it has been operational since 2009, its core service of cash loans to cash-poor, asset-rich clients with varying levels and frequency of income, has not changed much, according to the company. A client will bring in a luxury item, typically artwork, watches, antiques, or jewelry, for collateral. Borro gives customers a “sales advance” of around 70 percent of the estimated sales price for that good, at a monthly interest rate of 2.99-3.99 percent. Typical loan periods are for six months, and over 90 percent of customers pay back in full in that time frame.
Borro distributed $75 million in loans in 2014, collecting $20 million of that as revenue, an 80 percent increase from the year before. The need for the $19.5 million funding round, which would give Borro $66 million of outside capital raised, is to be used for expanding outside London and New York. Paul Aitken, founder and CEO of the company, said that he wanted to “add value without adding complexity” to the business, and found this round the “easiest fundraising” he’d ever done, taking just a few months.
Borro’s Series E funding was led by existing investment partner OurCrowd and new partner Rocket Internet, whose international reach could make Borro’s expansion easier. Canaan Partners, Eden Ventures and Augmentum Capital also re-upped their investment commitments to the company. The addition of crowdfunding partners like OurCrowd, according to company sources, could also be used to expand the range of loans that a customer can take out, which currently stands at roughly $2 million.