Fintech lender receives A$25mn funding boost
(23 February 2017 – Australia) Online fintech lender, Prospa has raised A$25 million of new equity to support growth it has revealed.
The capital raising was led by venture capitalist firm AirTree Ventures, and values the company at A$235 million.
The deal is the largest venture capital investment into an Australian fintech business and comes after AirTree raised a $250 million technology fund last year.
Since its launch in 2011, Prospa says it has made A$250 million in loans to 11,000 small business, and according to the company, it controls 51 percent market share.
Speaking to Fairfax, Co-CEO Beau Bertoli said Prospa was targeting half a billion dollars of loans this calendar year, the development of new lending vehicles (including invoice financing) and full-time staff number to double 120.
In addition to its new invoice financing products, Prospa is also seeking out business services financing products to assist small business in covering costs for services such as marketing and recruitment.
"Four years ago, non-bank lender brands were foreign to many small business owners, but today we are a very accepted way of accessing finance and Prospa has deep brand recognition across the small business market," Mr Bertoli said. "A lot of small businesses have an affinity with us, and we will use this capital to continue to build the brand further and become a leading lender."
Importantly for the major banks, Australian SMEs increasingly perceive their primary banking relationship as transaction orientated. East & Partners’ SME Transaction Banking Markets program, which interviews around 1,500 business each round, has found that the proportion of SMEs who primarily interact with their banks for credit needs fell below 50 percent in 2016 from as high as 69 percent in 2013.
“The small business banking landscape is rapidly changing,” said Martin Smith, Head of Markets Analysis at East & Partners.
“As businesses and business owners become less tied down to their primary provider, whether it be via personal relationships, credit security or funding availability, they will seek out alternative account services and cash management providers based on price competiveness, ease of use, tailored products and technological features.”
“Although small businesses currently bank holistically, they will soon enough spread their transaction banking needs across multiple providers as new digital technology and an increased focus on account portability lowers barriers to entry – particularly in the lending and payments markets.”
“As such, banks need to act, and act fast. Smaller, more nimble firms, including non-Big Four, alternative finance providers and fintechs are quickly encroaching on the long under-valued small business market,” he said.
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