By John Reynolds on Thursday 30 July 2020
Selina’s focus is growing its loan book for SMEs and consumers in the near term before expanding overseas to the US and Europe among other markets.
One of the co-founders of Selina Finance, the London-based fintech which offers property-backed loans and which has just secured £42m in debt and equity funding, is not too fussed about the company turning a profit.
Selina, set up last year by Italian-born Andrea Olivari, 33, and his co-founders Leonard Benning and Hubert Fenwick, reported a loss in the year ending August 2019 of £737,000, according to Companies House figures.
“We probably won’t be profitable [in the year ending August 2020]," said Olivari, speaking to AltFi in a phone interview.
"That is also part of the fintech game. Investors are very much keen for us to spend the money and grow and grab as much land as we can and really build the brand which will eventually turn a profit,” he adds, saying it is probably likely to turn a profit in two to three years.
It seems an enviable position to be in for Selina, particularly as its recent financing round was announced as the UK tries to return to normality following a lockdown period which has had dire consequences for some fintechs which have suffered job losses and fundraising challenges.
Currently, Selina’s offering is tailored for the SME market, which Olivari argues is “massively underserved”.
SME customers put up their homes or investment property as collateral to get a loan ranging from £25,000 to £1m with APR starting at 4.95 per cent.
The average loan amount, says Olivari, is around £150,000 and nobody has hitherto defaulted on a loan with Selina.
Unlike traditional loans, the loan is offered in the form of a credit facility to businesses which is paid back in instalments- borrowers can draw and repay funds whenever they chose- over five years.
Selina only deals with credit-worthy “prime” businesses and not “near-prime” and “sub-prime” ones.
“You can draw on it whenever you want over the duration of the facility,” says Olivari, who argues that Selina offers competitive interest charges and that, unlike its competitors, carries “no setup fees, no early repayment charges and no other hidden fees”.
Traditional banks and specialist mortgage lenders like Optimum Credit and Together offer similar second charge loans secured against property equity, although these competitors tend to offer pureplay loans, not credit facilities.
A further point of difference, says Olivari, is its competitors are not “really tech-focused” while Selina’s loan approval service, which is done entirely online using algorithms, can take five days or less, unlike rivals which can take weeks.
Selina’s online-only application process has helped the business during Covid-19, says Olivari, as competitors are likely to have faced restrictions on using surveyors to evaluate properties.
Demand has been “fairly steady” during the pandemic, says Olivari, pointing out that it turned some customers away which were “desperate for cash” as weren’t creditworthy.
“The bottom line is we have actually been growing through this difficult time and we’ve managed to keep our loan book very clean,” he adds.
Currently, Selina has just over 40 staff, a mix of tech staff, partnership executives, online marketers and those who work in underwriting and compliance.
No staff were furloughed or made redundant during Covid-19, says Olivari, who like his team has been working from home since March with plans to start returning to its Tottenham Court Road headquarters in September.
“We will go back to the office but we haven’t really suffered any major disruption by working from home,” he says.
“I really don’t mind eventually transitioning to a fully remote company. I don’t want Covid-19 to dictate our decision,” but says it's good for office morale to have a central London office space.
On the horizon for Selina is the consumer launch of its loan proposition, following FCA approval, which Olivari is “pretty positive” will soon happen.
Olivari says he is confident that the consumer arm can be a “huge part” of the business, with customers using the loans for the likes of school fees, weddings or consolidating debt.
The launch will be backed by a raft of marketing support, from word of mouth to online but unlikely to feature a big-budget TV campaign. Much of this funding will come from the recent £12m equity fundraise.
Olivari, who began his professional life working in investment banking in Milan and London, has a background working on startups, including as COO for on-demand cleaning service hassle.com and holding a senior role with job search engine startup Adzuna.
Like his co-founders, who “have known each other for quite a while”, Olivari has experience of working and living in different international markets, which helped form the name Selina.
“We wanted a name that sounded pretty good in a lot of languages,” he says, pointing to possible global expansion in the future, likely to include the US and Europe.
“We are country agnostic at the moment,” he adds, saying the focus is on the UK market, where Selina is likely to look for further multi-million debt funding for its loan book in the next six months but not further equity funding in the next 18 months.
What he is not agnostic about is the ambition of Selina, which he says could be over a billion-dollar business in the UK alone.
In the UK, he says “Selina is just scratching the service” for the moment, as it looks to grow its loan book.
This is a heady ambition and the company will face stiff competition from traditional banks and specialist lenders in an economic environment whereby customers might be less free-spending.
But Olivari can’t be faulted for having big ambitions for Selina.