Online lender Pave closes to new customers, explores strategic options

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Pave, an online consumer lender based in New York, has stopped making new loans — a retrenchment that reflects challenges facing the broader sector, according to the company’s CEO.

CEO Oren Bass said in an interview Wednesday that Pave stopped making new loans about two weeks ago. He said that existing loans — the company has lent around $25 million to consumers — will continue to be serviced without interruption.

Pave has made cuts to what had been a 15-person staff, but the firm is not shutting down, according to Bass. He said that the company is exploring strategic options, which he declined to disclose.

Bass attributed the company’s troubles to difficulties in accessing debt capital at affordable rates. Similar problems have hamstrung other online lenders in what two years ago was a fast-growing sector.

“Obviously 2016 was a tough year for the market generally, and so we’re currently evaluating the situation,” Bass said.

Pave has already been through a few different incarnations. The company was founded in 2012, and it originally provided a way to invest in a share of the future earnings of young adults who needed immediate cash.

In 2014, Pave restructured as a marketplace lender, while remaining focused on millennials in need of money. Accredited individual investors, family offices and other institutional investors could finance loans to young adults, who often did not have well-developed credit histories.

“Our goal is to actually go well beyond FICO,” Bass said in one 2014 interview. “If you are early on in your career, you don’t have a thick credit file.”

Later, the company became something more akin to a balance-sheet lender, according to Bass.

In April 2016, Pave announced that it had received an $8 million equity investment led by the venture capital firm Maxfield Capital. At the time, Bass told American Banker that it would use the new money to add employees with expertise in data analytics, operations and marketing.

Before it stopped making new loans, Pave was offering two-to-three-year installment loans from $3,000 to $25,000. The company’s borrowers are primarily using the cash either to refinance credit card debt or to pay for short-term educational programs, such as courses in computer coding.

Its competitors included the likes of Social Finance and Upstart, both of which offer personal loans and target young adult borrowers.

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