Fintech startup SeedFi announced Wednesday that it raised $65 million in new financing to help underserved communities struggling to make ends meet during the pandemic. The total amount raised consists of $50 million in debt financing in addition to a $15 million Series A led by Andreessen Horowitz.
The San Francisco-based company plans to invest the new capital in building out its product suite and growing its customer base. SeedFi’s platform provides low-income communities with the opportunity to build credit and foster a sense of financial literacy.
The company is launching with two initial product offerings. On SeedFi’s Credit Builder Plan, customers need to save as little as $10 from every paycheck. Their savings numbers are then submitted to credit bureaus in order to help them build their credit history.
“It’s been very rewarding helping those in need and giving them better financial products. I think 2020 in particular has been a tough year and low-income communities have been hit hardest by the pandemic,” Jim McGinley, co-founder and CEO of SeedFi, said in an interview with Built In.
SeedFi’s Borrow and Grow Plan provides customers with immediate access to funds in case of an emergency. The plan is presented as a more affordable option than traditional installment or payday loans, according to the company.
“It functions kind of like an emergency loan with a built in savings plan, and it’s also credit building. Because of that kind of tax savings account, we’re able to offer a much, much lower rate than what other competitive products might look like,” Eric Burton, co-founder and COO of SeedFi, said. “We’re helping people meet their emergency need for cash and putting them on a better path forward.”
SeedFi launched in private beta in 2019. During that time, the company found that, after six months of on-time payments, its customers with no credit history were able to establish a credit score of 600. SeedFi customers with existing credit scores and less than three credit accounts increased their scores by an average of 45 points, according to the company.
“We’ve seen firsthand how the system has been designed for underprivileged Americans to fail. They barely make enough to cover their expenses and any misstep can set them back for years,” McGinley said in a statement. “Our goal is to address the root cause of the problem and leave our customers better off than we found them.”
Over the last 10 years, McGinley worked across several startups and big banks with the ultimate goal of building a credit card product to serve low-income communities across the country. McGinley met Burton along the way, when the two both held positions at Capital One. It was there that they both began laying the foundation for what would later become SeedFi.
“I grew up in a super poor family in central Texas where I experienced first hand all of the struggles of being low income,” Burton said. “I’ve borrowed my way through life to get to where I am now, I put myself through school and I’ve struggled with credit card debt, so this mission is very personal to me.”
In addition to growing out its suite of savings products, the company is also looking to expand the size of its team. According to McGinley, SeedFi plans to build out its technology, compliance and risk departments as it continues to scale.
