Please note that whilst the campaign is labelled as EIS eligible, the Company has £1,900,000 remaining of its EIS limit. We will, therefore, be looking to seek EIS relief on the first £1,900,000 invested into the campaign, with the balance being ineligible for tax relief. Any tax relief is dependent on personal circumstances and may be subject to change in the future.
Assetz Capital is one of the world’s leading Peer to Peer (P2P) business and property lenders and operates in the UK market. We facilitate direct secured lending between investors and business borrowers via our online investment marketplace. We believe we've now achieved critical scale, given that we are profitable and cash generative, a rare achievement in FinTech.
Assetz Capital was the first P2P lender to our knowledge to offer purely secured lending, taking realisable security in every case to avoid loan defaults becoming losses. Gross interest of over £26 million has been earned by lenders since the start of lending operations in April 2013 on loans funded to date of over £317 million.* For all loans written up to 31 December 2016, as at 1 August 2017, the lifetime expected losses from those loans stood at 1.09%. As agreed with the FCA, Assetz Capital discloses up to date performance data for its loans based on annual cohorts, details of which can be found on our website.
Assetz SME Capital Ltd, a subsidiary of Assetz Capital Ltd, is authorised and regulated by the Financial Conduct Authority.
The valuation for this equity round is £50 million versus the recent post money valuation of our first round of funding that converted at a net valuation of £20 million (£25 million less the 20% convertible discount).
*source: unaudited management accounts.
Assetz Capital was founded to help the availability of business funding in the UK and to deliver attractive rates of interest to investors. In the first four years of operation we are confident that we have established that our business model can achieve both objectives efficiently and profitably. We plan to continue to scale up the operation with the aim of becoming one of the largest secured business lenders in the UK.
We aim to help:
• Private investors achieve a fair interest rate in the face of poor returns on bank savings accounts.
• Creditworthy businesses develop their companies through secured credit.
We believe that our success is based upon our mantra, “Fairer, Growth, Together” where borrowers, lenders, staff and shareholders all win by being in balance with each over.
Substantial accomplishments to date
Since commencing lending in April 2013, Assetz Capital has proven its position as a leading brand in the alternative business lending market.
Key statistics and achievements are as follows :
• We have arranged loans of over £317m since commencing in April 2013. Over £120m of this was in the financial year ending March 2017.
• Our investors have earned over £26m of gross interest before tax.
• We have actual and expected losses from the whole loan book of c£2.45m, just 0.8% of the amount lent, due to the strength of the security we take on each loan, a small fraction of the interest earned by investors.
• We moved from around £3m of losses in the 2015/16 financial year to around £1m of profit in the 2016/17 year, a c£4m swing as the business moved into profit, a substantial achievement in the sector.*
• The business is now cash generative.
• We now employ over 70 staff with 21 of these acting as our Regional Relationship Directors who meet with borrowers and introducers face to face.
• We recently hired Rob Pailin as Chief Commercial Officer and who is now Managing Director of the business. Rob was previously COO for the part of RBS to be divested as Williams and Glyn Bank.
• Lending in June 2017 was up 280% on the previous year.
• We have over 20,000 registered investors.
• We are currently originating around £400m of secured business loan enquiries per month.
• We are ranked 5th largest global P2P lender in the table maintained by www.p2p-banking.com.
• We are ranked 2nd largest P2P business lender in the UK (behind only Funding Circle) by http://www.altfidata.com.
*source: unaudited management accounts.
In Q1 FY 2017/18 Assetz Capital had revenues of over £3.4m.*
We charge the business borrower an arrangement fee of typically 3-5% of the loan inclusive of any introducer commission and we also charge them an annual loan monitoring and servicing fee (typically 0.9-2% pa).
Lenders do not currently pay fees for buying, holding or reselling loans on our aftermarket although this remains under review.
We pay capital into the discretionary provision funds that the company operates to protect lenders from losses on loans within our various investment accounts. Excess funds beyond those required to cover actual losses over time we intend to take to profit.
We are reviewing the potential for other forms of funding loans in addition to retail investors. We are in receipt of preliminary funding offers as low as 3% above LIBOR.
*source: unaudited management accounts.
Use of proceeds
Minimum funding of £1m is sought from investors. This is to fund a number of short-term capital expenditure projects. We will accept overfunding above this target as it merely reduces the next round of institutional equity investment pro-rata.
These capital projects are expected by the Directors to help the company continue its substantial growth and help it increase its lending further. We are also expecting to move premises shortly to a new 15,000 sq ft headquarters near Manchester Airport.
An IPO is also currently being evaluated.
Please refer to the Key Information document attached to the campaign for further important information about Assetz Capital and this funding round.
• Borrowing facilities for loans to small and medium-size enterprises (SMEs) in the UK stood at £110bn at the end of 2016. We believe that this gives huge room for growth by 2025 when peer to peer lenders are estimated to have over 35% penetration of this market (source: Liberum research). Assetz Capital has a competitive range of products compared to a bank and includes SME term loans, property development loans, bridging loans and commercial mortgages meaning that a borrower relationship can evolve over time rather than having to move to a new finance supplier.
Direct Private Investors:
• Private investors have had a very difficult time trying to produce acceptable income from their savings capital for many years and we do not see any sign of this changing. In a 2014 study of the peer-to-peer business lending market, 57% of lenders are over 55 and the majority earn over £35k (source: Nesta). As soon as Peer to Peer lenders obtain FCA full authorisations they can apply to HMRC to become ISA managers in order to open an Innovative Finance ISA. Assetz Capital intends to do this shortly.
Indirect Private Investors:
• There are many new ‘branchless’ bank apps and financial consolidation apps launching that seek to attract current account customers away from legacy banks and offer them a simpler way of running their financial lives. Over the next few years we expect that there will be a substantial shift of usage towards these new financial apps and we intend to offer ACaaS, (Assetz Capital as a Service) to all of these platforms so that many can offer interest producing investments to their customers. Current accounts are not expected to be profitable for these apps and new banks but we expect that they will monetise their customers with earnings from transactions that they carry out like currency transfers, investments, insurance etc are. The first of these ACaaS relationships are underway and is expected to be announced and taken live this year.
Characteristics of target market
• Peer to Peer lending is an important part of the huge new world of alternative finance that exists outside traditional banks.
The UK market size for investment includes:
• As at the end of 15/16 £518bn was held in ISAs and approximately half of this is in low return cash accounts but with the majority of the more recent £80bn or so invested in 14/15 and 15/16 going into cash ISAs (source: Government) and earning very low interest rates.
• In 2014, £150bn was being held in Self Invested Personal Pensions.
• Plus, as of 2014, many trillion of investments are privately held outside SIPPs and ISAs and within investment funds.
• "If P2P was to take 10% of the total cash and equity ISA market, UK gross P2P balances would increase 48x to £44bn" (source: Liberum).
• Our target market is SMEs in the UK that can offer both realisable security for their loans and afford to repay them from their profits and cashflows. We offer loans from £100k to £9m currently and this is part of a market that lends new bank lending facilities of c £5bn in just Quarter 4 of 2016.
• Nonetheless this is not the whole market as this data above is just that reported by the BBA for bank lending. Alternative finance is playing an ever increasing role in providing SME funding.
• Based on the value of loans outstanding to smaller businesses at the end of December 2016, we estimate the core SME funding market for new facilities is circa £60bn a year.
• Assetz Capital uses commercial finance brokers and other introducers across the whole of the UK to attract business borrowers. To support these introducers/ their borrowers on a local level we have an employed national network of highly experienced relationship directors to carry out initial vetting based upon their career of experience in business lending. We believe that this is by far the largest and most capable national sales team in our industry and we are relentless in seeking out new high quality team members. This aims to ensure that only creditworthy applications reach the head office for final credit review which helps make that process both efficient and deep.
• We have signed our first bank referral contract with RBS, the UK's biggest lender to small businesses, to pass over referrals for loan requests that it cannot fund. We are also signed up to the Government sanctioned loan referral platforms that are intended to do this for bank rejected customers. We are yet to see meaningful results from these initiatives and expect the bulk of business to be introduced.
• We attract lenders through substantial advertising and PR activity in the national press and online. We are also listed on large financial aggregator websites such as moneysupermarket.com. We are about to commence a TV advertising trial and a much larger presence in the national press as part of the process of achieving our aim of hitting retail funding of c£40m a month.
• We are very active in the press with regular articles or appearances in the Financial Times, BBC, The Times, The Sunday Times, The Independent, Evening Standard, The Daily Telegraph, Observer, The Guardian, Money Week, Investors Chronicle, Radio 4 Today, Reuters, Wall Street Journal and many more.
• As described in the Target Market section we will continue to promote the ACaaS service to the customers of the financial platforms and aggregators who have large client bases holding cash deposits looking for a return.
Utilising our growing national network of Relationship Directors and independent brokers, we visit borrowers following initial credit reviews to complete some further aspects of the overall credit approval process, prior to a detailed credit application being submitted to head office. This is a competitive advantage above those competitors who do not have large regional teams and just process internet applications. To our knowledge, we were the first Peer to Peer platform to have a regional network and have the largest team at this date. We see our competition to be, instead, challenger banks and other alternative funders who can deliver borrower rates in the 6.9-9.9% range and have a full national sales team. We know of very few companies in these categories indeed.
We believe that a business and its funding requirement can be best understood face-to-face as well as being able to get a good feel for the business and its management team. Furthermore, we believe that a mix of traditional best practice lending processes and face to face relationships combined with a highly efficient electronic platform and CRM system delivers the perfect mix of credit process quality and low cost of operation that permits safe and fast growth. We believe that our strong financial performance to date proves this is the right model.
We believe that our business lending does not compete directly with most other P2P lenders for another reason and that is that we believe that our average loan size, being around £768k, is larger than the average of many others.Additionally, these larger loans tend to be to larger businesses with more assets available to provide a security and with greater cash flow to service the debt and repay it, a better quality credit risk.
Our range of lending products described in the Target Market section make the job of the broker and our relationship managers very efficient as we have a range of solutions for a business looking for funding, not just a ‘one size must fit all’ approach.