Upstart Card Issuer Petal Aims High with New $126.6M Debt Facility

Petal is set to expand thanks to millions in new financing.

It may take money to make money, but Petal's got it covered. The upstart credit card issuer recently announced a brand new debt facility commitment, borrowing $126.6 million -- $100 million from Silicon Valley Bank and $26.6 million from Trinity Capital Inc.

Together with WebBank, Petal made waves in 2018 with its first credit card -- now, oddly, called the Petal® 2 "Cash Back, No Fees" Visa® Credit Card -- which used banking data, rather than just credit scores, to approve customers who lack credit history. It later launched the Petal® 1 "No Annual Fee" Visa® Credit Card, a card designed to help those who need to build credit.

The company now hopes to expand not only it's customer base, but it's card offerings as well. We reached out to Petal's co-founder and CEO, Jason Gross, to get a deeper look at Petal's out-of-the-credit-box lending philosophy and how the company plans to take advantage of this new opportunity.

Petal's inclusive "Cash Score" philosophy

Gross described Petal's approval system as "cash scoring." Instead of focusing primarily on your credit history, like most card issuers do, Petal looks at your overall financial status, including your income, your regular expenses, and your savings accounts. Petal then gives you a Cash Score, which can be used in place of -- or along with -- your traditional credit score.

Because Petal isn't entirely reliant on credit scores, it's able to offer credit to applicants with little to no credit history, which was the entire reason Petal was created.

"The inspiration to use cash flow comes from the desire to help more people access and build their credit," said Gross. "Millions of people get left behind or misjudged by the credit scoring system, including just about everyone who is young and new to credit. We use cash flow to expand access to safe and responsible credit for all those underserved by the traditional system."

100,000 cardholders -- and growing

In just the last few years, Petal's share of the credit card market has grown quickly. What started with a single card product in 2018 has already turned into 100,000 cardholders. Under current credit models, most of these cardholders had no credit score and were considered credit invisible. But Gross notes that Petal still has a lot of room to grow.

"One hundred thousand seems like a lot, but not when you consider the fact that there are over 100 million consumers in the U.S. with low or no credit scores," he said. And he would know: Gross spent time with the Consumer Advisory Board of the Consumer Financial Protection Bureau (CFPB) -- the bureau that makes sure consumers are treated fairly by banks and lenders.

The addition of $126.6 million will open up huge opportunities for Petal, and Gross plans to take full advantage of it. He said the new funds will help Petal reach millions of new customers, as well as expand its product base, adding, "We’re just getting started."

Driving the future of credit

From a quirky startup to a multimillion-dollar competitor, Petal has certainly made waves with its unusual scoring model. And its success may be opening eyes around the industry.

Gross was optimistic about the idea of other issuers taking a page from Petal. When asked if he thought more issuers would broaden their approval metrics, he said, "We hope so. The aim is to bring financial opportunity and innovation to everyone, and we believe that the future of credit includes both credit scores and Cash Scores being considered."

In the meantime, Petal plans to continue to grow and innovate. According to Gross, this is just the next stage of Petal's exciting future. "This will be the first of many expansions to follow," he promised, "including exciting new features and benefits for Petal card members and whole new products. Stay tuned!"