By Anna Irrera
NEW YORK (Reuters) - UK-based online lender Prodigy Finance has raised $240 million in equity and debt funding, as it seeks to speed up its expansion in the United States.
The funding round comprises of $40 million in equity led by venture capital firm Index Ventures, with participation from Balderton Capital and AlphaCode, and $200 million in a debt facility led by a global investment bank, Prodigy Finance said on Monday.
The company provides financing to postgraduate international students at U.S., UK and other European universities, who would normally struggle to get loans from financial institutions. It is among the growing cohort of companies that take advantage of digital technologies to offer loans online to customers who have been overlooked by mainstream financial institutions.
International students are normally unable to secure loans to fund studies at top universities in the United States or Europe because they lack local credit history, meaning banks will struggle to assess their creditworthiness.
Prodigy Finance takes into account the students' earnings potential based on the studies they will undertake and also uses credit scores from their countries of origin.
"We have thousands of data points from our partner universities to understand what the earning potential is," Cameron Stevens, founder and chief executive officer of Prodigy Finance, said in an interview.
The company started out 10 years ago by lending to postgraduate business school students.
It said it will use the funding to expand its presence in the United States by adding more courses that are eligible for financing on its platform in fields including business, engineering and public policy. It already lends to some students at Harvard University, Stanford University, Columbia University and the University of Pennsylvania.
The funding comes as the online lending sector faces growing pains, with some investors concerned about the quality of the loans issued.
Stevens said Prodigy Finances loans have performed well so far because it targets lower risk borrowers compared to others in the online lending sector. The company has provided more than $325 million in funding to over 7,100 students since 2007, and has never written off a loan, it said.
"Fundamentally we are lending to the best people around the world at the best universities around the world," Stevens said.