AltFi caught up with David Brennan, one of the founders of the quirkily named LoanRanger platform. LoanRanger is currently more of a direct lender rather than a marketplace lender. The platform lends the equity capital of its investors and, to date, returns have been reinvested in the business. The platform is, however, developing a peer to peer offering and in future they aim to have a fund type structure that will allow sophisticated investors to participate.
LoanRanger is unique amongst the platforms that we have spoken to in terms of the borrowers to whom they lend. Loans are short term (30 to 45 days), small scale (typically A$350), and made to subprime borrowers. The platform does not charge interest per se, instead borrowers pay an establishment fee of 20% and then 4% for each month, or part thereof, that the loan is outstanding.
The platform launched in March 2013 and lent A$2.6m via 8,000 loans in its first 18 months. A lot of this early period of operation involved refinement to the credit model which is highly selective and based upon a cashflow assessment. Loan Ranger’s proprietary ‘LendRight’ engine assesses the affordability and suitability of borrowers in order to identify their target borrower profile. It appears to be working, the default rate is currently running at 3.2%. Borrowers seem happy too with a 72% repeat borrower rate.
With 18 months of successful lending under its belt, LoanRanger is now ramping up the scale of its operation with 25%+ month on month growth achieved over the past few months. The team also has its sights set on diversification with a SME lending product in the pipeline, due to launch in early to mid 2015. The platform has partnered with a major (but as yet unnamed) US SME lender to bring this offering under the trading name LoanXchange. The offering will be a hybrid installment loan/line of credit product with loans of up to A$100k and terms less than 12 months. Typical interest rates will be 20% to 35%. In a similar manner to the consumer lending offering, credit assessments will be done on a cashflow and affordability basis which will open it up to a more diverse pool of borrowers than perhaps more traditional credit models.
Current investors in LoanRanger are mainly HNWI from Australia and the US including Jeff McCarthy, the former Managing Director of Lending Club Advisors. The boutique UK investment bank, Liberum, also has a stake in the enterprise.
To learn more about the Australian AltFi market, check out our roundup here.