Prospa raises $20m from Partners for Growth
Online business lender Prospa has raised $20 million from Silicon Valley-based Partners for Growth through a tailored debt facility that will allow it to ramp up loans and further develop its technology allowing credit assessments to be made in seconds.
Prospa, which has lent more than $400 million to small businesses, up from $250 million in February after a strong fourth quarter, has deals with 4000 distribution partners, including finance brokers and cloud accounting platforms. It also has a referral partnership with Westpac Banking Corp.
Prospa chief financial officer Ed Bigazzi said some of the new capital will be used for product development, including in invoice financing, and a stronger balance sheet will allow it to consider potential fintech acquisitions.
Prospa’s loans are funded through a securitisation trust, backed by global alternative investor Carlyle Group and a few other large institutional investors who Prospa won’t disclose. It has raised more than $100 million in debt financing. Because loans are made for 12 months and collected daily or weekly, they amortise quickly, allowing the book to be funded with less capital than traditional lenders. Prospa does not disclose its level of bad debts.
The Partners for Growth deal follows a $25 million equity raising in March led by AirTree Ventures and also backed by Square Peg. British-based Entree Capital and Ironbridge Capital invested in earlier equity raisings.
Mr Bigazzi said the company will continue to develop its proprietary technology, which automates data preparation for making credit decisions. Whereas traditionally credit officers would pull data sources about a borrower from various credit bureaus and reports, synthesise them on their web browser, and perhaps take half-an-hour to make a decision, Prospa’s technology allows it to digitally connect to around 400 data sources and made an assessment in an average of 13 seconds.
Partners for Growth Australia managing director Jason Georgatos said successful fintech lenders must figure out profitable distribution, how to reduce the cost of capital over time, and managing credit. “Having seen many other SME lenders in the US and around the world, Prospa is one of the best at executing on the key KPIs that drive success in fintech,” he said. PFG has done around 20 deals in Australia, including an investment alongside AirTree in online designer fashion rental business Glam Corner.
Prospa reckons it has around a 50 per cent share of the emerging market for online business lending. The other half of the market comprises players such as Moula, Spotcap, ThinCats, GetCapital, Marketlend, Capify, Max Funding, Business Fuel, OnDeck, Kikka Capital, Bigstone, Banjo, Waddle, Skippr and Timelio.
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