Octane Lending Takes Cautious Approach to Scaling Finance Startup

canstockphoto34781942Octane Lending might be in the market for additional lender partners to help back its new finance subsidiary Roadrunner Financial, Chief Executive Jason Guss told Powersports Finance. However, Octane is taking a conservative approach to scaling the business, to avoid complicating the operations with too many financial providers.

Roadrunner Financial, which officially launched in June 2016, is a joint venture between lender aggregator Octane Lending and three bank and non-bank partners, Guss said.

Roadrunner Financial utilizes a combination of the lender partners’ and Octane Lending’s capital to fund the loans, Guss explained. “There will probably be more [lender partners] in the future,” he said. “We are always talking to people.”

However, Octane is taking a cautious approach to scaling the business because having too many financing providers backing Roadrunner could become complicated, he said.

“We partnered with a few banks and also other types of financial institutions to utilize the technology that we built under Octane Lending, and also to serve a segment of market where we were having trouble attracting lenders to [Octane’s online] marketplace,” he said. “Namely, the segment of the market below where the bigger lenders stop lending, and the market above where the lease-to-own providers play. That narrow slug in low 600 Ficos is our sweet spot.”

Roadrunner is only interested in this narrow credit band of market, he said, which is why it doesn’t need to have a lot of financial partners. “If we were interested in covering a very wide credit spectrum — which we are not — we would need to have a lot of partners,” he added.

After a yearlong process — that began in about June 2015 — Octane Lending was able to attract bank and non-bank partners who were interested in the Roadrunner Financial venture, but did not want to expend any operational efforts.

From there, Roadrunner Financial was debuted, utilizing Octane Lending’s technology and operations, coupled with the bank and non-bank partners underwriting expertise and financial backing. Now, the subsidiary is projected to double its dealer network by yearend, bringing the total to 1,200; it also hopes to expand nationwide into the lower 48 states by June of this year, Guss said.

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