ZestCash is a payday loan company that was founded by former Google CIO and VP of Engineering Douglas Merrill. ZestCash aims to legitimize the payday loan industry. ZestCash has raised $73 million in a new round of funding. Matrix Partners provided $23 million in the form of an equity round. Existing investors Lightspeed Venture Partners, GRP Partners, Flybridge Capital Partners, and Lighthouse Capital Partners also participated in this round. The company also raised a separate $50 million line of debt financing from Victory Park Capital.
ZestCash uses machine learning techniques and data analysis combined with traditional credit scoring to offer credit to many people who would normally be turned away. Payday loans are common among consumers that do not have the credit to take out standard loans through a bank. One example is that a consumer will pay an average of $60 to borrow $300 for 14 days. After 2 weeks, the borrower must pay the entire loan and fee back in one payment. If the borrower cannot pay the loan back, then he or she can get an extension but will have to pay another $60 for the additional amount of time.
The average payday loan gets rolled over 6 times, which means that the average borrow pays $420 in fees to borrow $300 in principal. That is insane! In 2010, 30 million Americans took out a payday loan. Using ZestCash, borrowers can pick how much money they want to borrow and for how long. The company displays their weekly payment based on the terms.
Most payday loans are processed through brick-and-mortar stores, but ZestCash operates entirely online. The startup promises flexibility when dealing with individual borrowers and late payments. ZestCash currently has 75 people in staff and has loaned millions of dollars to thousands of customers. This new round of funding will be used for innovations in underwriting, expansion into additional states, and company growth.