Exclusive: “We want to originate €1bn to SMEs per year,” says BNP Paribas AM

Following on from the likes of Goldman Sachs in the US and Natwest in the UK, which is owned by RBS, BNP Paribas’ Asset Management arm has launched further into the world of alternative finance through its new SME lending platform. 

Unlike Goldman’s ‘Marcus’  and Natwest’s ‘Esme’ platforms - both examples of the growing trend for 'flanker brands' - BNP Paribas AM’s new SME focused lending business is not advertising directly to would-be borrowers nor does it have a snappily branded name. It's called by the more utilitarian SME Alternative Financing.

Also, says its chief Stéphane Blanchoz, Head of SME Alternative Financing , it is not strictly just a platform “but more of a franchise" owing to its close relationship with Caple, which the firm took a 10 per cent equity stake in back in November 2017.

Still Blanchoz is ambitious to grow its lending activities rapidly with the ultimate goal of soon originating €1bn across Europe per year with at least €400m from the UK.

“The ambition ultimately is to build throughout Europe with an industrialised process. We can realistically originate €1bn per year throughout Europe,” he said.

Blanchoz says he will be serving the most underserved part of the alternative lending market with ticket sizes starting at £500k and going up to £5m, therefore not directly completing with the likes of Funding Circle. All lending is unsecured, all to SMEs like Funding Circle but while the platform does go above £500k occasionally its bread and butter lending is generally below £100k. Therefore he says the lending will exist between the well-known digital platforms and the larger ticket private debt funds which tend to start lending at £5m tickets.

He adds that while the process of orgination will involve non-automated processes such as site visits, the firm will also look to create efficiencies through substantial investment in technology and some automation. “I want to promote a culture of industrialisation [at BNP Paribas AM],” Blanchoz said.

“A £500k loan should take one week, a £5m loan will take five weeks from application to funding,” Blanchoz added.

Since launching last month the platform/franchise has made just one loan but Blanchoz says he has a rapidly growing pipeline currently around £25m in the UK.

In September the platform will launch in the Netherlands, which has a fast moving alternative finance and fintech scene, with plans for a subsequent launch in Germany as well as other European countries in 2019.

Growth and dealflow is expected to come from partnerships with other existing online lending platforms although Blanchoz says this will be limited to just one per country. A deal with a major UK platform is in advanced stages.

He says that funding is currently coming from an approximate £100m warehouse facility from BNP’s coffers although the ultimate goal is to bring in investors, mostly pension funds and insurance  companies with an offer of 6-10 per cent returns. Investors will buy whole loans rather than individual loans being fractionalised. The bank will also take a stake in each loan, however, he adds, on an ongoing basis most likely a 5 per cent stake per loan.

The growing interest from traditional City firms shows while the non-bank lending market has certainly reached a certain level of maturity, competition for assets is just heating up.

BNP Paribas AM also launched a dedicated alternative finance-focused tech fund early this year as well as two new private debt strategies.