By Julie Verhage and Matthew Monks
(Bloomberg) --Social Finance Inc. is in talks with banks to secure a revolving credit line of as much as $1 billion after posting a second-quarter loss, according to people familiar with the matter.
The San Francisco-based company, whose main business is student-loan refinancing, has approached several financial institutions for a potential loan, said the people, who asked not to be identified because the discussions are private. The deal would be a precursor to an initial public offering, which is expected to happen sometime next year, one of the people said.
To fund operations and expansion, SoFi is looking to tap a larger pile of cash reserves than previously reported. The Wall Street Journal said last month the company had been in talks for a $500 million unsecured credit line that could be used for acquisitions. Terms of the loan aren’t set, and the plans could change, people familiar with the matter said. A spokesman for SoFi declined to comment.
SoFi is trying to transform itself into a broad online financial-services company. The company has been hinting at an IPO since at least 2015 but delayed those plans after turbulence in the financial-technology market. Since LendingClub Corp. and On Deck Capital Inc. went public in late 2014, their market values are less than half of what they were. Investors have high expectations for SoFi and have given the company a valuation of more than $4 billion.
Last year, SoFi co-founder and Chief Executive Officer Mike Cagney departed after the company faced claims over sexual harassment and a toxic workplace environment. The startup brought in former Twitter Inc. executive Anthony Noto this year in hopes of turning things around. He reiterated the IPO ambitions in an interview on his first day on the job, saying his goal was to get the company in shape to go public.
Under Noto, SoFi is continuing to add customers, but some of the core products haven’t been performing as well as hoped. Writedowns of under-performing loans drove a second-quarter adjusted loss of about $200 million, Bloomberg reported last week. Its financial results were also negatively affected by price boots that resulted in lower loan volume, amid a rising interest-rate environment.
With marketplace lending still out of favor in the public markets, SoFi has been branching into new offerings. It recently started offering a checking account-like product, which is being tested by 2,000 people and has a wait list of about 40,000.
--With assistance from Selina Wang and Gillian Tan.To contact the reporters on this story: Julie Verhage in New York at [email protected] ;Matthew Monks in New York at [email protected] To contact the editors responsible for this story: Mark Milian at [email protected] ;Elizabeth Fournier at [email protected] Michael Hytha