A company launched last fall by students at the University of Pennsylvania’s Wharton School experienced success in its pilot phase, during which it served as a lender to Wharton MBA students and recent graduates, and so this fall will launch nationally to lend to MBA students at 20 top MBA programs in the United States, the Financial Times reports.
Wharton student David Klien is chief executive and co-founder of CommonBond, which last year lent $2.5 million to 40 MBA students and recent graduates from Wharton using funds raised primarily through crowdsourcing. Now, the start-up has raised more than $100 million through debt financing and selling equity. It will expand to offer low-interest loans to MBA students at business schools throughout the country, including Harvard Business School, Stanford Graduate School of Business, Dartmouth’s Tuck School of Business, Columbia Business School and others.
“Before launching nationally, we wanted to ensure we had enough capital to meet the demand of our student and graduate borrowers,” Klein told the FT. “We believe our $100 million funding target gets us there,” he said.
Like a growing number of U.S.‒based MBA lenders, CommonBond is designed to provide an alternative source of postgraduate funding for MBA students, offering lower rates of interest than sources like federal loans as a reflection of the borrowers’ higher future earning potential. To finance its national launch, the company secured funding from investors such as Tribeca Venture Partners, the Social+Capital Partnership, and former Citigroup chief executive Vikram Pandit, according to the FT report.
Over time, the company hopes to draw funding from many sources, including alumni and hedge funds. “Our goal is to foster a community of borrowers from various schools and degree programs, as well as a community of investors of different types and styles,” Klein told the FT.
CommonBond offers borrowers fixed interest rates of 6.24 percent, which can be lowered to 5.99 percent when paid by automatic debit. There is a 2 percent origination fee for new, but not refinanced, loans. The federal Grant Plus loan, by comparison, features a fixed rate of 6.41 percent and a 4.2 percent origination fee.