Analysis Featured

VELOC, a vehicle line-of-credit

Finova is a Florida-based online lending company that can provide consumers with an almost instantaneous vehicle equity line of credit (VELOC) 24hrs a day, 7 days a week. They have innovated the title lending industry by breaking away from the traditional brick and mortar model and creating an online/mobile system that can assess a client’s creditworthiness and approve loans up to $5000 within 10 minutes. Finova uses a transparent fee structure that allows consumers to repay their loan over a minimum 12-month period and offers interest rates that are 50% lower than the national average.

Tapping into a $5.3bil (and Growing) Industry

CEO and co-founder Gregory Keough describes the traditional $5.3bil US Title Lending industry as “broken and in desperate need of disruption.” When asked about his reasoning behind founding Finova, Keough recounted a personal experience from two years ago, when one of his employees needed cash right away and went to get a title loan from a brick and mortar location. The employee ended up making 8 interest only payments before even touching principal balance. The interest was 300%. Keough recognized a consumer-saturated industry that was in serious need of an overhaul.

In a technology-rich era, people are looking for instantaneous results. In a recent press release on prweb.com, Keough commented, “consumers clearly prefer an online more automated approach that allows for much lower costs than the traditional industry.” Nobody would understand this better than Keough, who has successfully navigated though the fintech world for the past 25 years, most recently as the CEO Mobile Financial Service (a Brazilian joint venture between Mastercard and Telefonica).

Finova optimizes the title lending process through their online platform, allowing consumers to apply, get approval, and obtain their loan from home via computer or mobile device, 24hrs a day and 7 days a week. This makes VELOC accessible to a greater number of consumers each day.

Breaking the never-ending debt cycle

According to the FDIC, 28% of US households are living outside the formal financial system. These 70mil Americans are Finova’s targeted consumers. A majority of Finova’s clients are underserved by traditional banks and have turned to alternative lending institutions. The industry is inundated with predatory companies that lock borrowers into never-ending debt cycle with interest rates between 300-400%.

Finova’s goal is to break the cycle. Not only do they allow more time to pay back the loan (12 months versus the typical 30 days), but also a partial amount of every payment made goes toward the principle, so it is easier for clients to pay back the loan timely manner.  Finova has also created a reward system for their consumers that allows borrowers to earn “Finova Points” for every on time payment.  Borrowers can use their Finova Points to skip payments with no penalty.

Finova offers another reward for loan payments as well; they help consumers with bad or no credit establish or rebuild credit by reporting positively to credit bureaus. As the client makes payments and gains better creditworthiness, Finova offers better interest rates.  Finova calls this a process of the “Finova Score,” their in-house “proprietary constantly learning credit scoring system.”

A VELOC in 10 minutes

There are four main pieces of criteria a consumer needs in order to receive a title loan from Finova: 1) He must own a lien-free car title. 2) He must be at least 18 years old with a driver’s license. 3) He must have proof of income. 4) He must have proof of residency.  If the consumer meets those requirements then he can simply fill out an application online and with the use of the Finova Score system to determine your creditworthiness, you can be approved for a loan of up to $5000 (depending on worth of vehicle and the borrowers ability to repay the loan) within 10 minutes.

Once a client is approved and takes out a title loan from Finova, the title is held as collateral until the loan is repaid in full. (They are currently connected with 16 DMV’s to verify vehicle titles online). The consumer is given a code via SMS, which they can take to any Moneygram or Walmart in the nation to receive the cash. They can also make payments at those locations as well, even if they do not have a bank account. The goal is faster and easier loans, which are then paid off faster and easier for the consumer.

$500k in Just 2 Florida Cities with a Backlog of 10,000 New Clients

Since their launch in October 2015, Finova has seen a tremendous demand for their product. They are currently only operating in two Florida cities, and have already done around $500k. Keough reports that they have a backlog of 10,000 clients who want loans but cannot be accommodated at the moment. Finova’s biggest limitation at the moment is lending capital, but a recent signing on of a debt facility for $50mil is helping solve that problem.

Keough believes they have “created a new financial product,” and this product really seems to sell itself. While Finova does some traditional advertising with direct mailing and such, for the most part they gain new clients though referrals. “Clients really like us,” says Keough. Thanks to Finova’s innovative lending platform, consumers are leaving happy, and in return bringing in more business.  With their latest $50mil lending capital gain, business should be booming.

500 Startups’ Investment puts Finova on the Map

Finova continues to gain support in the industry with the announcement of a round of funding from 500 Startups. While Finova is currently only doing business in Florida, they hope to spread their business across the US. Second co-founder, Derek Acree believes, “As a top tier Silicon Valley venture capital firm [500 Startups will] make for an ideal partner” as Finova continues to grow. With their product in such high demand, it is only logical that Finova will continue to be successful and profitable as they move forward.

 

Authors:

George Popescu
George Popescu
Lauren Twardy
Lauren Twardy

 

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

2 Comments

Click here to post a comment

Your email address will not be published. Required fields are marked *

  • OK, so the obvious question is how will Finova adapt to the proposed CFPB vehicle title loan rules likely implemented in late 2018? This London Times piece appears to have been written prior to the Kansas City CFPB “show” put on last week.

    Does Mr. Keough expect to rely on establishing scale via his ability to access capital at a “digestible” rate, outlast his competitors and maintain margins by relying on the internet model while achieving low customer acquisition costs via referrals? If forced to keep these VELOC’s on his balance sheet, appears to be a huge challenge.

    Of course, it’s a certainty that consumer demand will not be subsiding.

    Jer – Trihouse

  • If the CFPB focuses on less then 30 days loans, and they forbid re-ups on the loans I don’t think Finova will have an issue.

    Will the CFPB cap interest ? Then perhaps will be a problem.

Testimonials

default image

"Your daily letter is great!" , Ram , Founder and CEO, PeerIQ

default image

"Hi George - just want to tell you that you are doing a great work with Lending Times;-) Brgds, Kasper" , Kasper, Partner and Co-founder at Dansk Faktura Børs A/S

default image

"I've been following your newsletter for some time now and have been very impressed with the content." Charlie,Co-Founder | Bolstr

default image

"Hey George, I must say I really enjoy your site. It has inspired me to do some changes at our platform and we are the biggest consumer lender in Sweden." , Ludwig, CEO @ Savelend Sweden AB

default image

"Your daily email is very useful. It gives quick update on what's going in the market. Thank you very much for all that info." Yann Murciano, Head of Base Metals Trading at Morgan Stanley

Our daily p2p news digest