Online Payday Loan Company Purchases Rival
By J.J. CameronPayday Loan Writer
Cash America International has been making money through payday loans - despite pigeon-holing itself as a brick-and-mortar business. But all of that is about to change.
The company will purchase CashNetUSA, for a cool $35 million, in order to move swiftly into the online payday loan world. Cash America is already the largest provider of pawn loans in Texas, with a network of 717 lending locations that offer cash advances in 20 states - but has been looking to expand into the online cash advance industy.
Mission accomplished. Thus far, the payday loan company has largely been depending on its stores to offer payday loans under the brand names “Cash America Payday Advance” and “Cashland.” It also offers check-cashing services under the brand name “Mr. Payroll.”
The acquisition of privately held CashNetUSA will help change that.
“By expanding our product delivery platform to include Internet access, we believe that we are positioned to serve a new customer segment beyond the reach of our current brick-and-mortar lending locations,” CEO Daniel R. Feehan said in a statement. “This will allow us to satisfy customers who seek short-term payday advances instead of higher-cost alternatives to meet their credit needs with ease and convenience.”
The transaction is expected to be completed within two months.
The lending of payday loans online is seen as the fastest-growing segment in the short-term advance industry; it’s expected to capture an even larger share of the market than brick-and-mortar stores over the next three to five years.
CashNetUSA was created in May 2004 and offers cash advances in 27 states; its gross cash advance portfolio recently reached $22 million. So far, the startup is estimated to have served over 250,000 customers.
“CashNetUSA is not the largest, but among the top 10 or 15 players, and among the very few to have undertaken the task of obtaining licenses state by state and building a robust proprietary technology platform to deliver loans in strict compliance of the state laws,” Mr. Feehan said in a conference call.
CashNetUSA, however, does not currently operate in Texas. But Cash America said it would build online operations there when the acquisition is completed.
Analysts gave the deal a thumbs-up.
“We are encouraged by the acquisition as it will give Cash America a presence in the fastest-growing segment of the payday loan industry,” Dennis Telzrow, managing director for Stephens, wrote in a research note. “The deal is expected to add roughly $0.04 to $0.05 per share in fiscal year 2006.”
