Nicholas Financial is zeroed in on market share expansion and its direct loan product as it enters a refreshed growth phase, Chief Executive Doug Marohn told Auto Finance News.
For the past two years, Nicholas Financial has played “defense,” Marohn said, focusing on protecting book value, cleaning up its portfolio and returning to disciplined underwriting.
“Now that we’re in a pretty good place in terms of portfolio quality and underwriting discipline, we’re now looking to put as much attention to our offense as our defense,” Marohn said. “If we’re going to keep a branch model, we have to find ways to bring in other revenue sources and also ways to retain our customer base, and that’s what the direct loan product does,” he said, adding that the direct product will continue to be an increased focus.
Most recently, Nicholas Financial rolled out direct lending in Illinois, Kansas, Michigan, Missouri, Nevada, and South Carolina. The only state left in the queue is Pennsylvania, in which the subprime lender is in the process of getting a license.
Direct loans are beginning to take a larger share of the lender’s portfolio as the product expands across Nicholas Financial’s entire footprint.
“Initially 2.5%, maybe 3% of our portfolio was direct loans if that, and that was in its heyday,” Marohn said. “Direct lending is now approximately 5% of our portfolio and it is only that low because even though we’ve rolled out to these other states, they’ve just rolled out recently. It takes a while to gain traction.”
As the other states expand, the direct loan product “will absolutely become more a part of our portfolio and we’re very comfortable to see the percentage increase over time,” Marohn added.
Meanwhile, the subprime lender is expanding its indirect footprint, launching in Salt Lake City, Utah, Boise, Idaho, and Moines, Iowa “in the coming weeks and months,” Marohn said. Nicholas Financial also has “expansion underway” in existing markets Milwaukee, Wis., Columbia, S.C., and Wichita, Kan.