With their intention to target Australian small and medium enterprises (SME’s), the UK marketplace lender ThinCats opened its website for business. The online lending platform enables sophisticated and wholesale investors to lend directly to these SME’s.
The Australian arm is run by Sunil Aranha, a banking veteran, who has had a distinguished career with Citi, CBA and Export Finance Investment Corporation in Australia. Aranha’s plan is simple he and his ThinCats team want to offer an alternative source of finance for Australia’s 2.1 million SMEs, each year these small companies borrow about $73bn a year to finance their businesses.
ThinCats works on an auction based platform, where the company seeking finance applies for a loan up to $2 million. They make their application via a “sponsor” (a licensed finance broker) who checks the applications and prepares a credit submission on their behalf. A little like the credit submission process normally held within a bank. I guess you would call it a mixture of FinTech and Classic Corporate Bank lending. Investors can outbid each other on what rates to offer the SME.
Aranha feels that their target company will be those SMEs that are still in their growth phase. But despite this growth they have little unencumbered assets to offer their bankers. As for what interest rates a lender should be expecting the indication is somewhere between 11-18%. This is the gap between current Australian overdraft costs and the cost of an unsecured loan.
Since opening three years ago their UK parent has recorded over $160m of secured business loans to SMEs. These loan sizes average between £50,000 ($92,000) and £2 million. With an average 10.9 per cent annual yield at a default rate of 2.3 per cent. It is really timely that we see a marketplace lending platform such as ThinCats direct its efforts into the segment most poorly supported by the Australian Banks and that is the SME’s. Best of luck to Sunil and all the ThinCats Australian team.