Interview with Matthew Powell, CFO of Lending Works

wiseclerk

What is Lending Works about?

Lending Works is an online marketplace lending platform for unsecured personal loans. We offer extremely competitive lender returns and fixed rate, flexible loans up to £25,000 over 1 to 5 years.

What are the three main advantages for investors?

  1. Lender protection – our unique Lending Works Shield consists of a reserve fund to cover loan arrears and insurance to protect against the primary reasons for borrower defaults, including loss of employment, fraud and cybercrime. No other peer-to-peer lender offers this. In addition, our underwriting processes are extremely robust, resulting in a 0.00% arrears and default rate since launch
  2. Great returns – our lender returns are extremely competitive and are protected by the Lending Works Shield, so the rate you see is the rate you get
  3. Flexibility – lenders can access their funds early using our Quick Withdraw facility, or can automatically reinvest monthly repayments using Auto Lend

What are the three main advantages for borrowers?

  1. Low cost loans – our loans are offered at market leading rates. By directly connecting our customers and cutting out the bank, we’re able to cut down the cost of a loan significantly
  2. Simplicity – by utilising the latest technology and being an exclusively online platform, we’re able to pay out funds within one working day of completing the simple online application process
  3. Flexibility – borrowers can make overpayments or settle their loans early at any time, without charge

What ROI can investors expect?

Lenders can expect returns of around 4.1% over 3 years, up to 6.0% over 5 years. These rates are protected by the Lending Works Shield so there shouldn’t be a need for lenders to factor in bad debts.

How did you start Lending Works? Is the company funded with venture capital?

We started building Lending Works in 2012 and launched the platform in 2014. The idea was to create a simple and safe platform to enable ordinary consumers to get a fair deal. We tried to make lending and borrowing through Lending Works as simple as possible – most of our customers do not have the time or desire to actively monitor and manage their account. That’s why we opted to steer away from an auction-based or “market” model and introduced features like Auto Lend to automate the reinvestment process.

The company is funded primarily by angel investors. We’ve raised around £4m in funding to date which has enabled us to navigate the launch period successfully. We’re now focused on driving exponential growth through innovative partnerships and new loan origination channels.

Is the technical platform self-developed?

The technical platform is completely bespoke and was initially built by an external digital services agency. Since launch we’ve brought all development activity in-house which allows us to innovate quickly and to regularly release updates. We hired our first Head of Technology, Michael Raasch, in September. Michael has over 25 years’ experience working for large investment banks and has been fundamental in preparing our platform for large scale. Continue reading →

Lendit Europe Recap

wiseclerk 1 Comment

I just returned from the Lendit Europe conference in London. It was a great occasion to meet so many of the people that developed p2p lending to the current state and hear what they have to say about the future.

The entire industry is enthusiastic as all figures report fast growth which will be further boosted by the tax incentives (NISA) coming for retail lenders in the UK . Cormac Leech, analyst at Liberum, projected that interest rates (and yields for investors) will in effect slightly rise for the UK platforms while they might slightly sink on Prosper and Lending Club. Others do wonder if the UK services will manage to scale loan demand fast enough to match the expected retail investor money looking to invest through the new ISA.


Impressions from Lendit Europe (photo used with permission)

There were multiple examples that marketplace lending is achieving broader and broader reach, both in terms of countries served (e.g. Ovamba, the p2p lending platform operating in Cameroon that GLI Finance invested into) as well as specific markets served (e.g. more and more property investing or Bitbond tackling Bitcoin based p2p lending).


Impressions from Lendit Europe (photo used with permission)

I did not watch all the panels and presentations in the main conference room (the keynote presentation slides are online here; the videos will be made available on the Lendit site in the a few weeks) as I spent much time to meet up with people that I previously only knew from email or phone conversations.

Continue reading →

Finexkap Raises 22.5M to Launch French Online Working Capital Financing Platform

wiseclerk 1 Comment

Finexkap, has completed a 22.5 million US$ fundraising, comprising 7.5 million US$  in Series A equity funding and 15 million US$ to finance the company’s lending operations.

Finexkap is a French working capital financing platform to purchase SMEs’ receivables on the web through refinancing vehicles managed by Finexkap AM, which is a wholly owned subsidiary of Finexkap. The platform provides a market-disruptive short-term funding solution to entrepreneurs needing fast access to financing, and the company plans to use the Series A cash injection to scale up its data and product operations, increase its marketing efforts and make additional strategic recruitments. The company will use the 15 million US$ of commitments secured for its refinancing vehicle to fund the first batch of receivables.

GLI Finance invested 4.1 million US$ in July 2014 as part of the Series A funding round and now has a 26.44% equity stake in the company following completion of the overall fundraising. Other investors include Finsight, a globally focused Fintech investment fund which includes partner, and former COO and Board Member of LendingClub, John Donovan, as well as Fintech private investors and family offices. Since its inception, Finexkap has been advised in its financial strategy and fundraising by Luc Hardy of Sagax, an early investor in and advisor of, LendingClub.

In France, the acquisition on a regular basis of non-matured receivables is a credit activity which only licensed credit institutions can carry out. After extensive and collaborative regulatory review processes with the French Financial Markets Authority (“AMF”) and necessary legal structuring, Finexkap AM  has just secured a licence which allows refinancing vehicles managed by Finexkap AM to buy non-matured receivables and, consequently, operate throughout the European Union and in other states party to the European Economic Area agreement. Continue reading →

Lendico Makes First Spanish Loans Available on German Marketplace

wiseclerk

Today p2p lending service Lendico made the first loans from Spanish borrowers available to German investors on the German marketplace. German lenders can now bid on these loans provided they fulfill a few prerequisites. To prepare for this, Lendico had in the past weeks informed interested investors of the necessary steps to enable bidding on these cross-border loans on the German marketplace:

  • Lenders need to upgrade to a (free) premium account, if they don’t already have one.
  • Lenders need to send a form via postal mail to the tax authorities that certifies the status of residency. Lendico advices that it will usually take the tax authorities 5-21 days to process this confirmation.
  • The returned postal form can then be submitted via post, fax or email (scan) to Lendico.

The origin of the listed loans is now marked by a flag symbol on the German marketplace (see below).


Excerpt of a screenshot of Lendico.de showing listed German and Spanish p2p loans

This does not work (yet?) for loans from the other Lendico markets.

Trustbuddy Acquires Geldvoorelkaar and Prestiamoci

wiseclerk 1 Comment

Trustbuddy has entered into an agreement to acquire Italian Prestiamoci, a long-term Peer-to-Peer (P2P) lender, for a total of EUR 5.3 million in order to strengthen its offering of business loans to small and medium-sized enterprises and consumer credit in most European countries.

Furthermore TrustBuddy has agreed to acquire Dutch Geldvoorelkaar for a consideration of EUR10.6m. The consideration comprises EUR 3 million cash, EUR 4 million through the issue of new shares at a 20% premium to the pre-announcement share price and a EUR 3.6 million vendor loan of which 50% is redeemed in January 2016 and 50% redeemed in January 2017. Shares issued as part of the consideration will be subject to lock-up restrictions which expire in January 2016 in respect of 50% of the shares and January 2017 for the remainder.

Both acquisitions remain subject to the satisfaction of certain conditions. In particular, the acquisition of Prestiamoci is conditional upon Prestiamoci receiving a payment services, PSD, license. The Company is currently considering various financing options, including a potential equity fundraising, to part finance the acquisitions.

Geldvoorelkaar (see earlier coverage)

Geldvoorelkaar is the first P2P lending platform with a credit licence issued by the Dutch Financial uthority (AFM).  Geldvoorelkaar offers a professional and established alternative source of financing for SMEs.

  • Geldvoorelkaar opens up European SME market opportunities to TrustBuddy. Management believes there to be substantial demand for alternative lending sources in the Nordic market in particular in P2P lending in the Netherlands.
  • Geldvoorelkaar has been fully operational since 2012 and has a c60-65% estimated market share.
  • Year to date, Geldovoorelkaar has funded EUR 20 million of SME loans with an average revenue margin approaching 6% with no active marketing.
  • Geldvoorelkaar is a strong SME platform with EUR 1.6 million expected revenue for 2014 and growth in the Netherlands expected at an average of 80% in the following two years.*
  • Geldvoorelkaar is already profitable with an expected earnings before interest and tax for 2014 of EUR 0.7 million
  • Subject to the satisfaction of certain conditions, TrustBuddy has agreed to acquire Geldvoorelkaar for a consideration of EUR10.6m. The consideration comprises EUR 3 million cash, EUR 4 million through the issue of new shares at a 20% premium to the pre-announcement share price and a EUR 3.6 million vendor loan of which 50% is redeemed in January 2016 and 50% redeemed in January 2017. Shares issued as part of the consideration will be subject to lock-up restrictions which expire in January 2016 in respect of 50% of the shares and January 2017 for the remainder.

Prestiamoci (see earlier coverage)

Prestiamoci is an Italian private P2P lending company focussing on long term consumer loans.

  • Prestiamoci has established a licenced P2P platform in the highly regulated Italian market. The acquisition is conditional on Prestiamoci obtaining EEA-wide PSD license approval, enabling European roll-out.
  • Prestiamoci re-launched its platform in May 2014 and has since funded EUR 175k with and average revenue margin of 4%.
  • Acquisition adds diversification to TrustBuddy’s existing offering into a product with lower regulatory risk and increased revenue visibility.
  • Prestiamoci’s seasoned management team joining TrustBuddy management will bring significant experience within credit risk assessment.
  • TrustBuddy expects to rollout a consumer instalment loan product in new markets in 2015, and envisages 80% of revenue from this new product from the Nordic markets.

In September 2014 Prestiamoci had concluded a financing round of 450K EUR and in October 2013 a previous capital increase of 550K EUR. According to sources, Digital Magics Angel Network ,which invested just a year ago and provided strategic support in refocusing Prestiamoci, achieves a gain of about 300% on the transaction. Continue reading →