Sunbit, a Los Angeles-based lending startup founded in 2016 by Arad Levertov, Ornit Dweck-Maizel, Tal Riesenfeld, and Tamir Hazan, has rapidly fueled its growth through substantial funding, raising $355 million in new debt financing led by major financial players including JPMorgan Chase, Mizuho, and Waterfall Asset Management. The company specializes in offering consumer loans ranging from $50 to $20,000, primarily facilitating in-person payments at various physical retail locations such as car dealerships, dental offices, and eyewear stores across 47 states in the U.S. This recent funding follows an earlier round where Sunbit secured $310 million from Citi and Ares, solidifying its financial standing to expand its services.
Focusing on brick-and-mortar stores aligns with Levertov’s strategic vision, capitalizing on the sizable $7 trillion market in physical retail where competition for payment solutions is lower compared to online environments. He emphasizes the non-discretionary behavior of customers in sectors targeted by Sunbit, allowing for a consistent revenue stream from loyal clients. The company sets its interest rates around 20%, slightly more affordable than the average credit card rate of 24%, and structures loans with a typical duration of six to seven months, supporting its mission to provide accessible financing options to consumers for essential purchases.
Since its inception, Sunbit has experienced impressive growth, processing more than 100,000 loans monthly with an average loan amount of $1,000. This growth trajectory indicates that the company expects to achieve $260 million in revenue for 2023, up from $198 million in 2022, highlighting a positive financial outlook. Levertov predicts that the company will reach profitability by the end of this year or early 2024, with a minimal cash burn estimated to be below $2 million. Previously valued at $1.1 billion during a fundraising round in May 2021, Sunbit is clearly on a path of financial ascendance.
Levertov’s personal journey shaped his understanding of the consumer lending landscape, particularly as he faced challenges accessing credit as an immigrant. Partnering with co-founders from various backgrounds, including venture capital, technology, and academia, Sunbit initially secured self-funding and drew a modest $2.9 million from small investors in its early stages. Subsequent rounds of investment, including a significant $26 million raise led by billionaire Oren Zeev, have bolstered its growth ambitions and solidified its operational foundation, with Zeev continuing to play a strategic role as a board member.
Targeting primarily lower to middle-income borrowers, Sunbit boasts an impressive approval rate of 90% for loan applications, with an average borrower credit score around 700. The startup innovates on traditional lending models by offering flexible repayment terms, including 0% interest loans for qualifying borrowers. This structure diversifies revenue streams through merchant fees, which average between 8% and 9%, reflecting the firm’s reduced competition in this segment. The company has begun exploring co-branded credit card partnerships, indicating a strategy to enhance its consumer offerings while maintaining healthy profit margins.
Despite the robust growth and a solid operational framework, Sunbit must navigate the inherent risks associated with consumer lending, especially across a spectrum of creditworthiness. Maintaining disciplined underwriting standards is crucial to mitigate the potential for rising default rates, especially as the landscape can shift rapidly. While the startup currently enjoys low delinquency and charge-off rates, it faces scrutiny over its credit reporting practices, as evidenced by consumer complaints to the Consumer Financial Protection Bureau (CFPB). Levertov acknowledges these issues with a commitment to improve customer relations, striving to foster transparency and accuracy in its reporting practices, thereby ensuring that Sunbit’s commendable growth trajectory continues amid the challenges of the lending landscape.
