Lending Startups Seek Buyers as Rate Hikes Hobble Growth

Venture-backed consumer lending startups are starting to fold their cards.

Happy Money, an online lending startup formerly known as Payoff, is in talks to sell itself, according to a person with direct knowledge of the matter. The Torrance, Calif.-based company, valued at $1.1 billion in a private financing announced in February last year, has held sale discussions with at least one financial institution, the person said. And Sable, a Y Combinator-funded credit card startup, recently sold itself to specialty lender Snap Finance, according to a second person with direct knowledge.

Lending startups such as 14-year-old Happy Money, which has raised nearly $200 million in venture capital, and 4-year-old Sable, which raised several million in venture capital funding, have sought acquirers after a spike in interest rates reversed the conditions that powered a breakneck expansion of fintech startups during the pandemic. Higher rates have boosted the cost of funding loans and hurt borrowers’ ability to keep up with payments. Meanwhile, venture capitalists’ interest in the once-hot sector has fallen sharply.