Subprime lender Southern Auto Finance Co. is looking to grow on the heels of a minority investment from a Colombia-based financier.
Finanzauto took a 20% stake in Southern Auto Finance Company (SAFCO), with an option to invest another 10% in the next three years, SAFCO Chief Executive George Fussell told Auto Finance News.
George and Andrew Fussell hold the remaining 80% of the company, according to a Jan. 24 Kroll Bond Rating Agency (KBRA) presale report of its latest securitization.
“You can’t grow your bottom line as fast as you can grow your top line,” Fussell said. The investment “will certainly have a positive effect on our funding strategy, depending on what [our] trajectory of growth is.”
SAFCO has a $204.5 million warehouse facility with Capital One it closed in early 2021, Fussell said. The Pompano Beach, Fla.-based subprime lender also securitizes on the auto asset-backed securities market and closed a $225 million deal backed by subprime receivables on Jan. 17, according to Finsight, which monitors securities. Capital One served as the sole bookrunner on that transaction.
George Fussell was introduced to Finanzauto through financial investment firms more than a year and a half ago, he said. “They shopped around and looked at a number of companies and we hit it off.”
The investment comes as auto lenders and dealers face ongoing macroeconomic pressures spurred by the pandemic. Subprime consumers, too, are squeezed for cash as the cost of necessities, such as food and shelter, remain elevated.
“Consumers who don’t traditionally get financing are in a really bad spot right now because their access to credit has been severely hampered,” George Fussell said.
“That’s a shame,” he said. “It’s all related to the bigger banks for capital reserve reasons not being in the market and then more recently your regional smaller banks having to increase their equity or their balance sheets to satisfy the government in post-pandemic times.”
SAFCO’s portfolio is near $350 million, George Fussell said. The company originated approximately $140.3 million in auto loans through the third quarter of 2023, an increase of 14% year over year, according to KBRA.
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