More big news from Prosper today and this story is very significant. Prosper has completed their first acquisition – American Healthcare Lending (AHL) – for $21 million in cash.
As the name implies AHL is for patients looking to finance their medical procedures. Founded in 2009 in Salt Lake City, Utah, they work in a number of verticals within health care: cosmetic surgery, fertility, spine and neuro surgery, behavioral health, just to name a few. They are not actually a lender as such; rather they have developed a cloud-based patient financing platform that is integrated with a variety of lenders including Prosper.
This is from the AHL website:
American HealthCare Lending sits at the intersection of the healthcare, technology, and financial services markets and we are using technology to bring innovative financial services solutions to a massive healthcare problem. Our patient financing platform allows healthcare providers nationwide to Make Healthcare Affordable™ for patients every day by offering high-dollar installment loans to individuals with good credit.
This acquisition all started when AHL became a referral partner of Prosper last year. AHL is an innovative young company that appealed to the executive team at Prosper. They are looking to disrupt financing in the healthcare industry in a similar way Prosper is looking to disrupt the broader consumer lending industry.
AHL works directly with a number of lenders, including Prosper, but their main innovation occurs inside the doctors’ offices. The patient can enter their information on the spot and get a decision on their loan instantly. The maximum loan size is $100,000 and loan terms go up to 7 years. Obviously the loans they refer to Prosper would fit within Prosper’s loan terms – a maximum size of $35,000 and a maximum loan term of 5 years.
A Strong Position in the Medical Financing Market
I chatted with the CEO of Prosper, Aaron Vermut, and the President, Ron Suber, yesterday about this deal and they were both clearly excited. For the past two years the Prosper team has been focused on growing the base of debt consolidation borrowers and they have been very successful at that. But now they want to broaden their approach. They see lending for elective medical procedures as a huge growth area and one that can help Prosper scale.
“The total addressable market for financing of medical procedures is in the hundreds of billions”, said Ron Suber. “The partnership with AHL gives us a strong position in this market.” What it also does is give them an entry point into Point of Sale. The applications for these loans are often done on the spot in doctors offices and will give Prosper some valuable experience in working with loans in that environment.
If you look at the loans that Prosper is funding today medical procedures make up a tiny percentage of loans available to investors. The vast majority continue to be for debt consolidation. But this is about to change according to Suber: “I think we will look back at this acquisition as the very beginning of a change where Prosper starts attracting a new kind of borrower.”
Prosper didn’t share any of the metrics for AHL so we don’t know exactly what they are getting for their $21 million. But on AHL’s website it does say that they have over 1,000 providers in all 50 states and that 300,000 people have received loans through their network totaling $5 billion. So, whether or not this is a great deal for Prosper remains to be seen. But as a first acquisition it makes a lot of sense to me. It gives Prosper access to a whole new market and should allow them to grow a large new channel of borrowers. And it is not that different to Lending Club’s acquisition of Springstone early last year.
When I chatted with Aaron Vermut yesterday it was for the next edition of the Lend Academy Podcast. We discussed this acquisition at length among many other topics – you will be able to listen to the entire interview when the episode is published in the next few days.
Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.