Nova Credit Raises $35 Million to Bolster Cash Flow Underwriting

Credit infrastructure and analytics company Nova Credit raised $35 million in new funding.

The Series D round will help the company boost the growth of the Nova Credit Platform, according to a Tuesday (Oct. 14) press release.

“The funding arrives as cash flow underwriting reaches an inflection point, with lenders, property managers and financial service providers increasingly recognizing that traditional credit bureau data alone provides an incomplete and therefore inaccurate picture of a consumer’s financial health,” the release said. “Cash flow underwriting offers a more granular, real-time view of financial behavior, enabling businesses to responsibly accelerate growth.”

Nova Credit previously announced that Chase, PayPal and Yardi would begin deploying Cash Atlas, Nova Credit’s cash flow underwriting solution, across their lending and tenant screening operations. The company said this highlights a growing shift in its industry toward comprehensive financial data analytics beyond traditional credit scoring.

“We’re in the middle of a transformation in how financial institutions and rental housing operators enable credit decisioning,” Nova Credit co-founder and CEO Misha Esipov said in the Tuesday release. “Traditional credit bureau data fundamentally misses so much about a consumer’s financial health that it is proving insufficient for today’s dynamic market. Cash flow underwriting provides the clarity lenders and property managers need to grow responsibly while serving consumers who’ve been historically misunderstood by legacy systems.”

PYMNTS Intelligence examined the range of methods lenders are employing to gain a more comprehensive understanding of borrowers’ financial health.

Lenders have tended to rely on FICO scores, which can be useful tools but can also come up short when determining applicants’ ability to repay their loans, PYMNTS wrote in January.

“While you need a FICO score, we believe there’s more to know,” ValidiFI CEO John Gordon told PYMNTS at the time, adding that FICO may be best seen as a lagging indicator of a borrower’s creditworthiness and ability to repay.

“But bank data and the consumers’ bank relationship, with all the information that’s presented, can fill in the gaps,” Gordon said. “What we have found is that if you’re just looking at accounts and routing numbers and not looking at the marriage between the account, the routing number and the consumer who’s applying with it, well, then, you’re missing the opportunity to better quantify that consumer on a number of different levels.”