ApplePie Capital, a company that focuses on providing funding for franchises is the latest online lender to land a deal with a bank. Yesterday ApplePie announced that Fifth Third Bancorp was investing in a $16.5 million round in ApplePie. QED Investors and Colchis also participated in the Series B round.
Along with this big news ApplePie also announced that they had secured a $180 million loan purchase agreement over two years with TowerBrook Capital Partners L.P. The funding will come from TowerBrook’s Structured Opportunities Fund as well as a credit facility provided by SunTrust Bank, another forward thinking bank.
The most significant part of this annoouncement is the bank partnership. Fifth Third Bank is a publicly traded Cincinnati based bank with a $20 billion market cap. According to Wikipedia, they have over 21,000 employees and total assets are $142.43 billion. Fifth Third also made an investment in GreenSky LLC earlier this year. The fact that a large bank like Fifth Third is partnering with a young fintech platform like ApplePie is a further indicator of where lending is going.
Vanessa Indriolo Vreeland, head of acquisitions and strategic investments at Fifth Third stated:
The solid foundation created by Denise and her team has positioned ApplePie to continue their positive growth trajectory. Fifth Third’s investment in ApplePie reflects our confidence in their strong management team and their ability to help small business owners secure capital.
According to the press release ApplePie has partnerships with 40 franchise brands and has funded $50 million across 120 loans since January 2015. What makes ApplePie unique in small business lending is that they have a proprietary channel of borrower acquisition with their partnerships. Median net worth for borrowers is $2 million with an average FICO of 750+.
While bank partnerships are nothing new to the online lending industry this deal is significant because Fifth Third is such a large bank. With their previous investment in GreenSky, they are clearly taking an interest in fintech firms. For banks that have significant assets on their balance sheet it is relatively easy for them to do partnerships such as this one which is one of the reasons I expect bank partnerships to only increase in 2017.