Skip to content
Subscriber Only

Banks Aren't Lending Enough. Can Startups Do Better?

Banks Aren't Lending Enough. Can Startups Do Better?
Photograph by Getty Images

The easy money of the aughts came with a drawback or two, but the extent to which the consumer credit market has dried up since then isn’t without its own problems. Trustworthy borrowers with credit damaged by the financial crisis are having an unreasonably difficult time getting loans from banks. At least that’s the argument made by a new wave of tech-savvy financial upstarts who think they’re smarter than banks and are willing to be braver.

The latest such effort comes from FreedomPlus, which said Wednesday that it will begin offering loans of up to $35,000 to consumers with damaged credit scores because it can predict whose scores will soon rise. The effort is being bankrolled with $125 million from Vulcan Capital, the investment group owned by Microsoft co-founder Paul Allen. In a five-year pilot program, the company says it lent $25 million to people with average FICO scores of 576, and only 2 percent defaulted.