Entrepreneurs and business owners now have the option to fund their dreams without selling a part of their soul to the banks.
Enter ThinCats, a new peer-to-peer business lending platform that has launched in Australia to assist the country’s 2.1 million small to medium sized business gain access to cost effective funding. This is good new for savvy investors too, who can now lend directly to SMEs.
In summary, the company is shaking up the traditional business-lending scene.
How does this peer-to-peer thing actually work?
It all seems pretty simple.
Apply for loan
SMEs can apply for loans of up to $2 million through a “sponsor” (licensed finance broker), who vets applications and prepares a credit submission on their behalf. ThinCats Australia then accepts applications and lists eligible loans for auction on its platform, and registered lenders can download the detailed information pack and ask questions before deciding to make a bid for a portion of a loan. Lenders also set the amount they wish to invest and the expected interest rate in return, typically between 8 per cent and 16 per cent per annum.
Each loan is made up of a number of individual investors lending directly to the borrower and managing their risk by spreading their investment over a number of loans. The loan is funded by the lowest bidders who get the interest rate they requested and the borrower gets the weighted average interest rate, truly determined by the market place.
Once the auction has been completed, ThinCats Australia does the paperwork and arranges the transfers of funds to the borrower.
The ThinCats platform manages individual loans directly between the lender and the borrower, collecting the monthly repayments from borrowers and distributing them to lenders.
As the borrower, you repay principal and interest on a monthly basis so that lenders get a regular income at a fixed interest rate. Lenders can monitor their investments online via their dashboard.
And if the borrower defaults? Lenders decide upon the action to be taken to recover the funds owed.
Another step forward in removing those SME growth obstacles
CEO of ThinCats Australia, Mr Sunil Aranha, has more than 25 years international and local SME banking experience with Citibank, Commonwealth Bank of Australia and the Export Finance Investment Corporation in Australia. According to him, Australian SMEs borrow about $73 billion a year to finance their operations, and the company is an alternative to the restrictive and high-cost lending that major banks offer.
“The vast majority of these businesses are hindered from growth by not having access to prompt and cost-effective funding to capture business opportunities as they arise, which is potentially available from Australia’s 400,000 high net worth investors and their super funds holding around $1 trillion in investable assets looking for better returns”, he added.
Could peer-to-peer lending disrupt the world of finance?
The global market for peer-to-peer lending is currently worth $6 billion and doubling in value every year, as the concept gains broader understanding and acceptance.
ThinCats Australia is a joint venture with ThinCats UK, which has completed more than $160 million worth of secured business loans over the last four years and is one of the two leading peer-to-peer business lenders in the UK.
The company is still pushing the envelope in financing, and proposes to operate a secondary market which will allow lenders to sell loans if they need access to their cash before the loan has been repaid.
Scott Strain, Director of Trade for UK Trade & Investment Australia and New Zealand, said “We are very pleased to be assisting one of the UK’s leading peer-to-business lending companies, ThinCats, in bringing its platform to Australia.
“Investment in fintech is growing faster in the UK and Ireland than anywhere else in the world, and Australia’s emerging fintech scene can greatly benefit from British expertise,” he added.
This cat seems anything but thin, if you ask us.