The online consumer lender Upstart is laying off 7% of its workforce as funding difficulties continue hampering its ability to make loans.
Upstart told roughly 140 hourly employees who process loan applications that it was cutting their positions, the company said in a securities filing Tuesday. It cited a "challenging economy and reduction in the volume of loans on our platform."
The job cuts amount to about 7% of the company's headcount of around 2,000 employees, a company spokesperson said. They come as Upstart, which uses artificial intelligence to lend to consumers with lower credit scores, struggles to get banks and investors interested in buying enough of its loans.
"Given the challenging economy, we are making this difficult decision for the long-term health of the company," Upstart said in an emailed statement. "We do not expect any further layoffs, and continue to hire for roles that are strategic to our business."
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New figures for the third quarter will come when Upstart reports its quarterly earnings on Tuesday. The company told investors in August to expect more decreases.
"We're not happy with our results. We're not a company that likes to have a declining revenue from one quarter to the next," Girouard said in August on the company's earnings call.
He also laid out actions that executives are taking "to make the company stronger and better," particularly by shoring up its funding profile.
Upstart has said that several banks' and other investors' appetite for its loans has dulled as worries of a recession grew earlier this year. The firm has started to hold more of the loans it makes on its balance sheet, but the pullback by loan buyers has prompted it to slow its overall loan originations.
Girouard said in August that Upstart was working to get longer-term commitments "from partners who will invest consistently through cycles" rather than make buying decisions on a short-term basis. But he also cautioned "this will take some time to bring to fruition."
Morgan Stanley analyst James Faucette wrote in a note to clients last month that Upstart "remains one of our least favorite risk/reward propositions" among the fintech companies it covers.
Upstart's earnings outlook does have some potential upsides, such as a boost to revenue from the higher rates the company is charging to loan buyers.
"Still, challenged funding dynamics, worsening relative credit performance, and origination trajectory keep us cautious," Faucette wrote.
