Subprime lender Arivo Acceptance is eyeing growth in 2021 on the coattails of increased funding resources and mounting momentum in recent months as it works toward STIP-less funding.
The Sandy, Utah-based lender recently renewed and upsized its warehouse line of credit with JPMorgan Chase to $250 million from $200 million. Arivo is targeting the first quarter of next year for its sophomore entry into the auto asset-backed securities market, Michael Gustafson, vice president of capital markets, told Auto Finance News. The deal is estimated range between $190 and $200 million, he said.
Arivo’s debut transaction in November 2019 clocked in at $166 million.
Participation in the capital markets is integral to Arivo’s strategy of securing diversified funding sources, Gustafson said. “It’s important for us to build that foundation in the securitization market. It’s one of the legs of the stool, but I wouldn’t say it’s the only leg. Moving forward, we really want to stay diversified in how we how we fund the business.”
Arivo Acceptance has a managed portfolio of about $250 million.
Meanwhile, the upsized warehouse facility with JP Morgan will allow Arivo to expand its market presence in Kansas, North Carolina, Ohio, South Carolina, Tennessee, and Virginia, according to a release. The lender has seen a “faster than expected” rebound in recent months, Gustafson said, leading to origination volume growth of 80% to 90% from pandemic lows. “We’re upwards of $20 million [in originations] per month over the last couple months. [In November 2019], we were closer to $12 to $14 million per month,” he said.
Arivo’s origination strategy lies in working toward a STIP-less environment, Alli Schreiber, director of dealer experience, said. “Going STIP-less is unheard of in our market, as everybody knows, in subprime. So that’s something that we’re shooting for — really trying to get to as high as percentage as we can in our fundings, that they all come in STIP-less.”
The lender harnesses alternative data and alternative resources, such as a partnership with TransUnion, to work toward that goal, Schreiber said. “Our current average turn time on funding is less than two days,” she said, noting that a high percentage of loans are funded on the same day.
Loan-modification programs have also normalized since peaking at around 5%, well under the industry average, Gustafson said. Normative modification rates usually land around 1%, he explained, and have returned to that level.
“Heading into 2021, our goals are to get our second securitization in the market and secure that funding,” Gustafson said. “That gives us an open runway in our renewed warehouse facility to continue our growth, expand our existing dealer base and get better penetration there,” he said.
“We’re really hoping to carry that momentum from late 2020, in terms of growth [into 2021], and continue on that trajectory,” Gustafson said.