The typical Reverb.com customer isn’t typical. Think 20-something bass player with a blown amp, a lousy credit score — or no credit history at all — and a gig this Friday.
So the Chicago-based online music gear marketplace is teaming up with an alternative lending startup to offer financing to folks who may be creditworthy, but only if you look hard enough.
Affirm, the brainchild of PayPal co-founder Max Levchin, uses sophisticated technology to evaluate potential lendees, then offers a simple, fixed-term loan if they qualify. Borrowers can choose to repay in three, six or 12 months, said Reverb founder David Kalt.
“They use different models, like social media scores and online purchasing patterns,” Kalt said. “I think they’re going to change the way people use credit.”
Kalt said not everyone will qualify for loans. But Affirm aims to catch people it views as sound risks despite flags like a lack of credit card, or unpredictable income. Interest rates range from 6 to 18 percent, depending on the borrower, Kalt said.
“There are millions of people in the U.S. who, while credit-worthy, are underserved by banks and credit card companies,” Brad Selby, Affirm’s vice president of merchant services, said in a statement announcing the deal. “They are young. Their income streams are unpredictable. Or they just don’t want to hold credit cards.”
Kalt said the service has been available for some buyers for about a month. Much of the gear sold on Reverb is used, which can be hard to secure traditional financing for, he said.
Launched in 2013, Reverb is an online marketplace specializing in musical instruments and equipment. Founded by Kalt after he bought the Chicago Music Exchange in 2010, it takes a 3.5 percent cut of all transactions.
Kalt aims to undercut online marketplaces like eBay, which typically takes 10 percent of the sale price, while creating an online environment tailored to musicians. The Reverb site includes not only listings but articles and videos about music gear, as well as reviews.
Kalt, co-founder of optionsXpress, an online trading platform sold in 2011 to Charles Schwab for $1 billion, said the site has about 250,000 to 300,000 listings and is growing steadily.