Agora Data says it is “making history” with its “radical” AI.
The Arlington-based SaaS company, which focuses on the auto finance industry, capped off 2020 with what it says is the first-ever crowdsourced auto securitization. And this year, it announced the launch of a new tool that provides underbanked dealers the ability to secure a line of credit.
Our mission was always to take the underbanked car dealer and the underbanked small finance company and make them very bankable because car dealers are the ultimate entrepreneur. They’re great people but they’re just underbanked,” Steve Burke, co-founder and CEO at Agora, told NTX Inno. “Our goal was to take that underbanked or underserved community of dealers and give them the same kind of elegant and abundant financing that a large bank or a large institution or a large finance company could get.”
The crowdsourced securitization tool, called Neuron, can take hundreds of originators with different credit grades and types of collateral, then aggregates them into a securitization that can be traded on the capital markets. Because its first securitization was an unrated private placement, Burke did not disclose how much it was worth. However, he noted it was a little less than $100 million.
“Most importantly for a dealer is it will allow them to grow because it’s not looking at debt to equity tests or tangible net worth tests, it’s more the type of collateral, the type of originations and their underwriting guidelines that will structure how much money they can get,” Burke said.
Because Agora’s focus is on buy-here-pay-here dealers and small finance companies, the AI tool will allow dealers to reduce debt expenses and offer lower interest rates, which Burke said he hopes and encourages the dealers he works with to pass on to the customers. He added that the securitization tool providing access to the capital markets, which were previously unavailable to those kinds of dealers, it opens up the possibility of bringing billions in new assets onto the market.
Agora is hoping to close on a second crowdsourced securitization in the second quarter of this year with larger commitments, with plans on closing one or two more by the end of the year.
“If you think about auto loans, it’s one of the oldest assets out there… and it has typically been unavailable to the capital markets from this channel,” Burke said.
Since its launch in 2017, Agora has developed a number of tools for the industry, including an insights and analytics platform, as well as a reverse inquiry tool that helps give buyers more access to high-yielding auto loans. Its most recent tool is AgoraCredit, which helps underbanked originators move from senior lenders to interim credit lines.
“We want to foster a great community of the underbanked and underserved… we want to be able to provide the right tools, the right analytics… the technology all to make it a better industry for the community of dealers and finance companies and consumers,” Burke said. “What we really want is to push the idea of having an entrepreneur car dealer dream big. We’re making it very affordable for the debt of that decent-sized to small dealer to be able to survive in this environment ,and they can only survive if they have a level playing field on their debt service.”
Burke said that during the pandemic, the subprime market has been performing well, which he credits to the resiliency of the subprime borrower. It has also given the company’s AI data when originators are most stressed financially. Because of this, Agora plans to keeps its focus on the auto industry. However, Burke said that in the next few years the company may begin looking to expand its tech into new verticals.
“We've made a strategic decision in the near-term to stick with auto. However, we built the platform where it will handle any consumer-type asset or consumer-type loan,” Burke said. “Anything that’s consumer related, our platform will handle from a technology standpoint.”
