By Guglielmo de Stefano on 3rd December 2015
Bigstone Capital, a start-up Australian loan market dedicated to working with small businesses, has recently partnered with the Interface Financial Group (IFG), one of the North America’s largest alternative finance sources. Both companies have launched a Pacific region joint venture to provide invoice finance services to small business. I caught up with Boyd Pederson, CEO of Bigstone Capital, to discuss the partnership and future plans.
According to the Bigstone boss, the joint venture will enable him to offer a full range offering of funding solutions. Crucially Investors will be able to automatically diversify their investments across a portfolio of various funding products and tenures.
Boyd is obviously delighted with the partnership, as IFG has already funded billions of dollars, supporting thousands of businesses in 9 countries around the world and it has also created an innovative product that bankers call spot-factoring. This product seems to have a flexible functionality and offers small businesses funding of single or multiple invoices. Bigstone would act as an on-demand, pay-as-you-go, invoice-funding partner, with no application fees, no restrictions on invoice amounts, and no termination costs.
“The team at Bigstone is very excited to be partnering with IFG to help small business owners and investors achieve their goals. This is just the beginning as we are building a range of credit funding products, supported by proprietary credit methods, models, data and most importantly, a market where a wide range of investors can participate in this new asset class.”
In addition to invoice financing services, Bigstone will expand its offering, providing small business with loans. Borrowers will be able to get loans from $5,000 and $250,000 and they will be assessed not only on assets, but also on performance, profitability and potential. The new product will be available at the end of the first quarter of next year.
“Early in 2016, Bigstone will launch a working capital loan funded by marketplace investors. We expect our second working capital funding to have rapid uptake with small business advisors, brokers and other channels.”
When asked about international expansion, Boyd said that for the moment they are completely focused on Australia - it takes time for a marketplace to consolidate - but expansion is on the agenda for Bigstone in the near future. At the moment Boyd says the company is looking at other markets – particularly UK and US – just to analyse business models of foreign platforms.
Boyd added that:
“Once we have demonstrated the power of our market funding and proprietary risk-based pricing we intend to expand first in Australia, followed shortly by growth in adjacent Asia/Pacific markets"
The Bigstone boss also talked about regulation and changed climate that Australia seems to be experiencing with the new Prime Minister Malcom Turnbull. Many observers argue that Australia lags behind its major global peers in term of regulation. Indeed, many argue that policymakers are trying to regulate the local alternative finance sector using existing rules, rather than come up with new laws, therefore reducing opportunities for platforms, investors and borrowers.
Boyd agreed that peer-to-peer lending faces more regulatory hurdles than crowdfunding. Platforms need three licenses to start their activities: a licence to operate as a financial services firm; a custodian authorization, that is a permission to collect and hold money from investors; and they must be appointed as investment schemes as well. Consumer-lending platforms need even more licenses though.
“Marketplace lending is strictly regulated in Australia relative to some other more developed markets. This relatively high barrier to entry provides strong protection to investors, and helps to ensure that only the most credible and trust worthy companies will be able to become successful marketplace lenders.”
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.