Finova financial Raises $52.5M - WSJ

1. Finova Financial Raises $52.5M First
Round For Car Equity Loans
Finova Financial executives (left to right): Juan Ramirez, CEO Gregory Keough, Derek Acree,
and Alfredo Rosing. PHOTO: FINOVA
By
Tomio Geron
Aug. 4, 2016 7:30 a.m. ET
Finova Financial has raised $52.5 million in its first institutional funding—much of it in the form of
debt—for its consumer lending service that provides car owners with a line of credit.
The funding was led by MHS Capital, with participation from Refactor Capital; CoVenture;

2. Metamorphic Ventures; 500 Startups; Funding Circle co-founder Sam Hodges; NerdWallet co-founder
Jake Gibson; and Al Hamra Group, a company owned by a ruling family in the United Arab Emirates.
A “large percentage” of the round was the credit facility, the company said, but declined to give
specifics.
Founded in January 2015, Finova provides loans in exchange for liens on consumers’ cars, which the
company calls a “car-equity line of credit,” which resembles a home equity credit line. Its loans are
typically $1,500 to $1,700.
Finova’s funding comes on the heels of a slight uptick in venture investing in fintech startups, which
rebounded in the second quarter of 2016 with $1.03 billion raised from 51 deals, up from $783 million
from 46 deals in the first quarter, according to Dow Jones VentureSource. However, online lending
startups, particularly peer-to-peer startups, fell out of favor with investors following the stumbles
of LendingClub and others.
Car-title loans are used by consumers who have limited access to cash in an emergency, which often
leads them into taking out high-interest loans, said Chief Executive Gregory Keough, who was
previously chief executive of Mobile Financial Services, a joint venture between MasterCard and
Telephonica SA.
Finova, which operates only in Florida, plans to use the new funding to expand and is working with
regulators to enter other states.
West Palm Beach, Fla.-based Finova, with 25 employees, is attempting to change the industry by
offering lower rates and making it more transparent and easier for consumers to pay back their loans.
“At Finova, we’re very transparent,” Mr. Keough said. “Customers have access to our online portal and
can see all their payments and terms and conditions and when their next payment is due.”
Loan companies in this industry often charge an annual percentage rate of 300%, said Mr. Keough. Car
title loan companies include Savannah, Ga.-based TitleMax Inc.

3. Finova charges about 70% less than the industry average, according to Mr. Keough said.
A loan of $1,000, financed at $1,079, would require monthly payments of $110 for a total payment of
$1,320 and an effective rate of 22%, according to the Finova website.
Some companies require consumers to pay a bill each month in person. Finova, by contrast, allows
people to pay bills with cash atWal-Mart, CVS or MoneyGram locations. Finova loans allow 12 months
to repay, compared with 30 days for many car title loans.
In contrast to typical paper applications, with Finova people can apply on a website or mobile device by
providing information about their cars and driver’s licenses and receive decisions quickly, Mr. Keough
said. About 65% of customers apply via phones.
Finova is providing the loans directly, not passing them on to other lenders. Finova is a secured lender,
receiving the first lien position on the cars, Mr. Keough said.
The car equity loan is Finova’s first product, and the company intends to launch other products for
“unbanked” consumers, as the company describes its target market.
“My investment thesis is: financial services for the rest of us,” said Sheel Mohnot, the partner at 500
Startups who leads the firm’s fintech investments. “There could not be a better fit (than Finova) for
working with a population who is unbanked.”
Write to Tomio Geron at tomio.geron@wsj.com