SoFi Technologies and Best Egg are growing their loan platforms with respectively $2 billion and $500 million loan agreements led by Fortress Investment Group in a time proving to be private credit’s shining moment.
The investment management firm once majority-owned by Japan’s SoftBank has been slowly adding such fintechs as private credit clients.
Last year, Fortress struck a £750 forward flow agreement with UK fintech Tabeo to help it grow and acquire more customers, and it provided a $300 credit facility to Canadian small business financing fintech Merchant Growth.
“SoFi’s loan platform business is an important part of our strategy to serve the financial needs of more members and diversify toward less capital-intensive and more fee-based sources of revenue,” said SoFi CEO Anthony Noto in a prepared statement. “We’re pleased to see continued strong demand for SoFi’s loan platform business. Fortress’ collaboration, seamless execution and appreciation of the platform's value proposition makes them an exceptional partner.”
The purchase commitment Fortress and tech-driven investment manager Edge Focus inked with Best Egg will allow the firm to serve more borrowers as well, Best Egg CFO Andrew Deringer said in a release. Under the purchase facility, both Fortress and Edge Focus agreed to underwrite a fixed portion of loans facilitated through Best Egg.
With private credit deals, fintechs like SoFi and Best Egg and other types of clients are able to secure funds with “certainty and speed” in tighter bank lending environments, according to a June primer by Morgan Stanley.
“Unlike most bank loans, private credit solutions can be tailored to meet borrowers’ needs in terms of size, type or timing of transactions,” the firm said in the primer. “Similar to bank loans, however, the majority of private credit lending is in the form of floating-rate investments that change as rates change, providing real-time interest rate mitigation compared to investments like fixed-rate bonds.”
Dominick Ruggiero, co-head of specialty finance at Fortress and architect of both the SoFi and Best Egg deals, noted that SoFi’s platform and credit solutions focus “create a compelling investment opportunity for Fortress’s funds.”
At a Morgan Stanley conference in July, Regions Bank CEO John Turner recognized private credit as a looming threat to banks, acknowledging the industry as “a competitor” and noting that the bank lost “a potential opportunity” to direct lenders not long before.
“Typically, they’re providing a couple turns more leverage than we would be willing to provide, they’re providing longer terms, they’re providing more loan proceeds,” he said at the time.
Wells Fargo CFO Mike Santomassimo said at the same conference that investment firms can offer “credit that we might not be comfortable with putting on our balance sheet.”
BlackRock, which has been offering private credit for the past 20 years, expects the industry to balloon to $3.5 trillion by the end of 2028, up from the current $1.5 trillion size.
Rather than seeing private credit lenders as competition, some banks are electing to join forces with them. Citi and Apollo Global Management launched a $25 billion private credit direct lending program last month.
Citi entered a smaller-but-still-hefty deal with LuminArx Capital in January with the launch of Cinergy, a strategic private lending vehicle built to offer a range of private credit solutions to companies.
