A clever fintech startup is set to shake up the world of lending for small business and provide a rewarding opportunity for individual investors at the same time.
TruePillars is the first marketplace lender in Australia to focus exclusively on the small to mid-sized business market, providing loans from $15,000 and $250,000 over a five year period.
The platform has been established by John Baini, a career banker with extensive senior experience with National Australia Bank and the Royal Bank of Scotland in Australia, the UK, Europe and the Middle East.
TruePillars is the solution for two gaps he sees in the market – a fairer source of funding for SME expansion and a transparent, professionally risk-evaluated, diversified opportunity for investors.
“I saw the successful rise of marketplace lending in the UK and Europe while I was working in London. In the UK in particular, marketplace lending has been responsible for significant job creation and excellent investor returns. It’s a clear win win,” says CEO John Baini.
“SMEs in Australia have a long history of difficulty in obtaining finance to expand unless they have property to offer as collateral.
“This often means they can’t expand, even though business is booming. Given that nearly three quarters of Australians are employed in small to mid-sized businesses, this puts a significant brake on national economic growth.
“The TruePillars lending model fixes that problem. We use our expertise in assessing established businesses for their ability to repay a loan, rather than focusing on collateral if they can’t. We simply don’t approve loans for businesses we believe shouldn’t be borrowing. It’s a better option for both businesses and investors.”
John has a special interest in small business for two reasons. Firstly, coming from an immigrant family that established itself in Australia by creating their own employment in small business and secondly, as a banker where he held senior decision making responsibility in thousands of business loans. Hence, the TruePillars name that pays homage to what he sees as the true pillars of our economy.
TruePillars’ interest rates are determined for each loan by a combination of the risk rating applied to each business and market forces through a competitive auction system. This means interest rates are fair and more competitive for both business and investor.
“The platform allows both investor and borrower to be in control and monitor every aspect of their activity in real time. The whole process is completely transparent” says John
When it launches on April 6, TruePillars will become Australia’s first marketplace lending platform giving investors the opportunity to self-select the businesses they wish to support.
“Our strategy is to bring this investment opportunity to everyday Australians,” says John.
How it works
Businesses apply online for loans between $15,000 and $250,000. If they pass assessments for their ability to repay the loan, they are given a risk rating and this is displayed to registered investors in the online marketplace, along with other information provided by the business. The business name remains anonymous to encourage sharing of information with investors.
Investors who join online are able to browse the marketplace and make investments from as little as $50 in as many businesses as they like, choosing the interest rate they wish to offer. With such a low minimum investment, the investor has the opportunity to diversify their investments via exposures to a portfolio of small and medium businesses.
When the requested loan amount is filled, investors can continue to invest, but those who have offered the highest interest rates will drop off. Dropped investors and new investors can continue to invest until the loan’s time on the marketplace expires, but only at an interest rate lower than those already offered. This is how a market relevant rate is established.
When the loan’s time on the marketplace expires, the investments at the lowest interest rates totaling the value of the loan will be accepted. Investors receive the interest rate they bid at the auction. Borrowers pay a blended rate of all accepted bids.
For the period of the loan borrowers pay a monthly repayment and consequently investors receive a monthly payment of principal and interest into their online account. Visit TruePillars
By
Kate Allinson
TROUT Creative Thinking™
