Prospa float reveals a new world of online business financing
Online small business lender Prospa is set to hit the ASX on June 6 with a market capitalisation of $576 million.
It’s a lofty valuation for a relatively new business lender with a net loan book of $200 million and a statutory net profit in the 2017 financial year of just $1.2 million.
But the number – settled after an institutional book build for Prospa shares last Thursday – points to the aggressive growth aspirations for the Sydney-based group, which is raising $146 million in an initial public offering fully-underwritten by Macquarie Capital and UBS.
In its prospectus filed with the corporate regulator on Monday morning, Prospa said it expects to originate $385 million in new loans in calendar 2018, up 34 per cent from the $288 million written in 2017. It has also forecast revenue will rise by 82 per cent, from $56 million to $102 million.
Prospa joint chief executive Beau Bertoli said the growth targets reflect rising demand for unsecured small business finance with fast approval times, given this market has largely been neglected by the major banks. Since it was founded in 2012, Prospa has made loans to 12,000 customers, with an average loan size of around $26,000.
While big banks typically seek security from SME customers in the form of the family home and take several weeks to process applications, Prospa lends up to $100,000 with no security, makes a credit decision in 15 seconds, and puts funds in the customers’ account the next day.
For such convenience, customers pay a high price. Prospa’s average annual percentage interest rate was 41 per cent at the end of 2017, down from 45 per cent six months earlier and 59 per cent in 2016.
Mr Bertoli said quick access to finance and confidence that loans will be approved are more important drivers for his customers than costs.
“Our research shows that price is one of the lower considerations,” he said. “There is this misconception that price is the only factor that comes up … We offer rate for risk and price across a very broad spectrum of risk rates.”
Prospa, which is backed by private equity owners Entrée, Airtree and SquarePeg, said on Monday its retail offer would be open to clients of Macquarie Equities, Crestone and JBWere; some other investors chosen by the company; and its employees. Others will have to wait until the shares hit the public market.
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Source: Prospa float reveals a new world of online business financing | afr.com
