Groundfloor, a real estate crowdfunding platform open to non-accredited investors, entered into a whole loan purchase relationship with Direct Access Capital (DAC), a specialty finance company focused on providing liquidity to non-bank lenders of short term residential backed business loans. This marks Groundfloor’s first institutional partnership to enable the company to scale its loan origination volume and expand its product offerings over the next year. The shared target is $100 million in loans through 2018.
Groundfloor, an Atlanta-based startup in the Advanced Technology Development Center’s ATDC Signature portfolio of companies, allows borrowers to access flexible and affordable investment capital while enabling individual investors to earn higher returns on investments with access to short-term, high-yield investments. Typical available interest rates range from 6 percent to 14 percent on terms of 6 to 12 months. This new purchasing relationship will increase Groundfloor’s lending capacity for borrowers seeking larger loans (up to $500,000 and in selected cases up to $2 million), and help the company to offer new investment products with a variety of repayment options.
“Direct Access Capital is a highly expert, value-added financing partner whose support will enable Groundfloor to triple revenue growth,” said Brian Dally, Groundfloor’s co-founder and chief executive officer. “Our target to supply $100 million of loans is a testament to the market demand for value-added real estate investment credit, as well as the strength of Groundfloor’s underwriting and servicing.”
DAC will leverage Groundfloor’s loan origination pipeline, proprietary grading algorithm, underwriting criteria and asset management practice the company has built over the past three years. Groundfloor will service loans for DAC alongside loans held by retail investors, leveraging the same personnel, standards and practices to maximize timeliness and extent of repayment. Groundfloor’s historical loss ratio to date is just 70 basis points, returning 14.85 percent net on 134 loans and $12.4 million of principal repaid with an average repayment term of 7.7 months.
“Groundfloor has demonstrated the potential for hyper-growth while maintaining their track record of originating a quality debt product in the market tor real estate investment loans,” said Noah Martin, DAC’s chief investment officer. “We believe in their unique business model and are proud to contribute to their mission to democratize investing for all.”
Groundfloor earned a historic qualification by the SEC in August 2015 to sell private real estate debt investments to non-accredited investors. To date, Groundfloor lends in 27 states, is growing its retail base at a rate of over 10 percent per month, has sold $40 million worth of securities on its platform and has raised $8.5 million in venture capital from leading fintech investors.