07 - 05 - 2015 | |
HOME-GROWN peer-to-peer lending platform Capital Match is already looking at expanding overseas, less than a month after it officially started operations.
Co-founder Pawel Kuznicki told The Straits Times in a recent interview: "The next stop will likely be a local operation in either Malaysia or Indonesia. Indonesia already has a thriving SaaS economy with freelancer and crowdsourced designer platforms growing fast. Peer-to-peer lending is in its infancy in the South-east Asian region, so there is a huge opportunity to grow this business."
But Mr Kuznicki added that more work needs to be done before plans are finalised, especially as "there isn't a one-size-fits-all solution due to the country-specific nuances of lending and doing business".
Capital Match allows individuals to "invest" in businesses by lending to them directly, starting with a minimum amount of $1,000, in return for fixed monthly repayments.
This is unlike equity or securities crowdfunding where individuals, specifically accredited or institutional investors buy into or offer business loans to a business in return for shares. The process is regulated by the Monetary Authority of Singapore.
Capital Match has completed two loans, each with an interest rate of about 2.4 per cent a month.
The first was a $100,000 loan for a logistics company with a six-month tenure. The firm had invested in more vehicles and a larger warehouse to service more contracts and needed working capital to meet a cash-flow issue.
A second loan of $150,000 with a 12-month tenure was for a beauty-salon chain that wanted to upgrade its flagship store to offer more upscale services and improve its operations.
Businesses that borrow via the platform pay a pre-determined interest rate, which typically ranges from 1.5 to 2.5 per cent a month. Loan sizes vary from $50,000 to $200,000, with a tenure of three to 12 months.
Capital Match's aim, said co-founder Kevin Lim, is to "fill a gap in the banking ecosystem".
"Where a business can't get a bank loan, but is operating well and is demonstrating predictable cash flows, we can certainly step in to help."
Mr Lim said the Capital Match platform allows borrowers to obtain the "next best interest rate after banks", which have stringent lending criteria.
"If you do not qualify, you are then considering either credit cards - which is not ideal if there is more than one shareholder in the company - or alternative lenders that could charge anything from 5 to 8 per cent a month."
Mr Lim said the firm is in talks with local banks on possible partnerships to beef up financing options for customers.
"The partnership we envisage is where the bank refers the borrower (it) rejects to us... and vice versa."
Mr Lim added that Capital Match can supply a partner bank with relevant information such as repayment history if one of its borrowers decides it wants to also apply for a bank loan. "For us, helping a company get a loan is not a means to an end.
We hope to help these borrowers build up a credit history, and eventually be able to go back to their bank for a loan - no one can beat a bank's interest rate," he said, noting that traditional bank loans have interest rates of about 5 to 10 per cent.
A DBS spokesman told The Straits Times that peer-to-peer lending provides small and medium-sized enterprises (SMEs) with an alternative form of financing, which, in turn, "will support the further growth of the SME ecosystem in Singapore".
But companies should be mindful that such a model, if taken up over an extended period of time, would typically come with an annual compounded interest rate that is higher than traditional lending offered by banks.
"If they decide to pursue this form of financing, our view is it should be for short-term purposes," said the spokesman.