Here's a scenario: You're pressed for cash and your credit is keeping you from getting a conventional loan. Would you take $10,000 from a lender if it meant giving away a percentage of your future earnings?
It might sound like a modern-day form of indentured servitude, but that's exactly what Chicago startup Cumulus Funding is offering. And the company just raised $30 million in equity and debt to bring its unique lending model to more borrowers.
Cumulus Funding announced Friday that it has raised a $6 million Series A, led by Continental Investors LLC, along with participation from HC Technologies, D-W Investments, Bridge Investments and Service Provider Capital. The startup also announced that it secured a $25 million debt financing facility.
Launched in 2012, Cumulus lets people bypass traditional bank loans and secure funding through what the company calls an "Income Share Agreement" (ISA), which allows customers to receive funds in exchange for a small percentage of their income.
Cumulus loans range from between $1,500 and $10,000 in exchange for up to 10% of your income. The contracts lasts between 2-6 years, and the specific percentage of your income is determined based on how much you borrow and your credit score. If approved, you can receive funds in 1-3 days, Cumulus says. And if your income rises, your payments do as well.
Cumulus says it has given ISA loans to over 500 customers to date.
“We believe the hard-working labor force of this country is our single greatest asset, and they deserve a financial partner whose interests are well-aligned with theirs," Cumulus Funding CEO Nathan Popkins said in a statement. "Access to capital is possible using a structure that is flexible, simple, and easy to understand.”
Cumulus isn't the only startup that takes a "future income" approach to lending. Upstart, a Silicon Valley company founded by a team of ex-Googlers, gives loans to entrepreneurs for things like startup expenses, paying for a coding bootcamp, or paying off student debt, in exchange for part of their future income. New York-based Pave started out by giving new college grads loans in exchange for a percentage of their future income, but shifted its model to personal loans when ISAs proved too legally complicated.