The firm, which specializes in providing loans to SMEs and property developers in the UK, raised a total of £3,179,750 through Seedrs, which now boasts more than £4.5 million raised for various crowdfunding and peer-to-peer platforms.
According to Assetz, the campaign funding will be used to double its staff numbers, focus on retail marketing and establish international joint ventures. Also noteworthy, Assetz’ fundraising round represented the second largest campaign hosted on Seedrs, the largest campaign remains wine and beer producer Chapel Down Group’s £3.95 million fundraising campaign in early October 2014.
As summed up previously on Crowdfund Insider’s, Assetz Capital hopes to run £ 1 billion in loans by the end of 2016 and the lender has a good start in reaching its goal. Launched in April of 2013, the P2P lender has funded over £70 million in secured lending and states not a single investor has lost a penny to date. Recent data also indicated a weighted average gross return of 10% per year and the platform has returned over £2.5 million in interest to investors. Assetz Capital has enjoyed a 300% per year growth in lending benefiting from the shift in loans to direct lending, away from banks, and attracting a growing number of investors as they seek better yield in in their investments.
Assetz Capital recently secured up to £150 million for loan originations from Victory Park Capital in January this year. Earlier this year, RBS named Assetz Capital, along with Funding Circle, as beneficiaries of a pilot scheme to refer small business customers turned down for loans by the bank to the peer-to-peer lender.
Stuart Law, co-founder and CEO of Assetz Capital, helms one of the UK’s fastest growing peer-to-peer platforms with £80m lent in just two years. I recently had the opportunity to connect with Law via email to discuss the platform and team’s success and vision. Our interview follows:
Erin: Congratulations on your two year anniversary. Assetz Group began as a leading buy-to-let broker founded in 1999, providing the trusted foundation on with Assetz was built. Please comment on your decision to shift to P2P lending.
Stuart: Thank you very much; I must say it feels like a lot longer than two years! Assetz Property is still very much alive and thriving as a leading buy to let property agency, but back in 2012 when we began to plan our peer-to-peer lending platform, Assetz Capital, it was very much based on the lack of funding from the banks for SMEs and property developers that drove us. The two businesses are separate but linked by the fact they both offer income producing investments with security of capital. Keep your eyes open for a new crowdfunded buy to let platform shortly.
We wanted to provide a better funding service for businesses while delivering a better return for investors. Our vast experience in investment, as well as using property as security meant that we were in a perfect position to set up a platform that we believe holds the strongest secured business lending proposition in the sector.
Erin: What led to your founding Assetz Capital in 2012? What challenges and successes have you experienced since its launch?
Stuart: We started the business in 2012 and launched lending in April 2013, and there have been so many successes that it’s difficult to talk about them all. The inspiration was very basic – we wanted to make the process of sourcing good finance for businesses, better and easier, while creating healthy returns for investors who were income starved in the recession.
As with any disruptive business model, it takes time to gain traction. We’ve had so much support from government and experienced, influential business owners and entrepreneurs that we know peer-to-peer lending is very much here to stay, it’s a case of all platforms increasing the awareness of the benefits for businesses and investors. The process is very much underway.
Our successes are numerous but each time we have an announcement, it supersedes the previous one. In the past few months, we’ve announced plans to launch in to invoice finance thanks to an international partnership, a referral deal with the Royal Bank of Scotland (RBS) and the first £150m of institutional investment. They all have to work together to make this model work and that is our current challenge. The coming six months will see numerous other individual deals and announcements which will only make Assetz Capital even stronger, and bigger.
Erin: Where does Assetz fill a needed niche in the P2P lending market? Who do you see as your peers?
Stuart: Assetz Capital is one of the biggest peer-to-peer lending platforms in the UK. The niche we operate in is secured business lending and our deep credit experience as a team. We have highly experienced and professional credit experts across the business that have seen and done all of this over many years of professional lending but the Assetz Capital business offers them an efficient environment to operate within. Some peer-to-peer lenders are FinTech with credit bolted on but we feel that we are deep credit with FinTech bolted on.
Lending to SMEs, house builders or other types of small businesses is what we do so we aren’t particularly focused on any one sector but support the business sector as a whole with most types of finance they may require not just simple term loans but invoice finance, trade finance and mortgages.
Erin: How does Assetz maintain a competitive edge with its 8%- 15% annual interest rates, an interest rate sometimes higher than traditional banking loans?
Stuart: Our business operates differently to most banks and to other business peer to peer lenders. Due to handling an average loan size of £400k or so, we must visit potential borrowers and can make credit decisions based upon our deep credit experience and also a personal review of the borrower and their business. Many times this produces different outcomes to a bank’s credit process and we can lend where they cannot, or sometimes we are just faster than a bank and that is more important than rate for the borrower.
Generally speaking, the higher the level of return for investors, the more risk is involved; however, our underwriting team always takes security so that if there was a default, the assets taken as security should comfortably cover the value of the loan.
Erin: Assetz specializes in providing loans to UK SMEs and property developers, having raised a total of £3.2m through its recent Seedrs’ convertible equity campaign. Why did you choose Seedrs for the campaign? Were you surprised by your record-breaking success?
Stuart: We knew Seedrs was a great platform for us to offer our lenders and other investors the chance to buy equity in Assetz Capital. Seedrs has an outstanding reputation in the industry and it was a pleasure to deal with the team.
In terms of whether we were surprised or not, I wouldn’t say we were surprised – we were very pleased to be able to give something back to all those that have supported us. The capital raised will help us expand our team, invest in the retail market and well as help fund our continued expansion into the global market.
Erin: With approaching £80M in loans funded, by 8,500 lenders and around 150 borrowers, where do you predict growth? What initiatives are in place for Assetz to reach its £1B in loans goal by the end of the 2016/17 financial year? How do you envision Assetz growing in three years? Ten years?
Stuart: As a business we have always looked to the future of the sector and we have a clear strategy in place – the £1 billion loan target has been carefully chosen as a realistic aim that we can strive for based upon funding lines available to us and our competitiveness in the market. The wheels have already been set in motion through the deals agreed with RBS and others, but there are many other factors at play. Government initiatives to allow investors to allocate peer-to-peer loans within SIPPs and ISAs will have a huge, natural impact on our business. On the other side of the coin, the Government’s support for alternative finance to become a much stronger force in financing UK businesses in the future and with less systemic risk that traditional financial services we have the backing we need to grow quickly with proportionate regulation
Erin: With ISA eligibility coming quickly down the line (i.e. making several thousands of pounds of P2P member tax-free every year) and the FCA regulatory body considering how better to regulate and monitor the surging market, what suggestions do you have?
Stuart: Since day one, we have acted as if we were regulated even before the interim FCA regulation came in. Now that the FCA has and is continuing to develop its view on the market, we are in a solid position when it comes to best practice. For us, being a better solution for investors and borrowers is about transparency and honesty. The FCA has a similar view of the market, which is pleasing to see.
One area that does still need some clarity is the definition of defaults and losses so that lenders can better judge who to work with. By this I mean that there should be a standard benchmark of lending performance published by every platform and that benchmark should be fair and not misleading. There is still some way to go on this but people like AltFi have been assisting the process.
Peer to peer or marketplace lending will grow very quickly in the next few years to a scale to challenge the banks and in some ways take over the parts of the market that they wish to move back from somewhat following changes in bank regulation and capital requirements. We have a big job to do as a sector and have a lot of responsibility to build long-term businesses that perform well in the next cycle.
Erin: What is your opinion of University of Cambridge’s Centre for Alternative Finance and its recent publication, Moving Mainstream?
Stuart: Nesta and the University of Cambridge have done an excellent job of tracking the sector, showing growth patterns and setting expectations for the future. We have contributed to these reports and agree with many of their findings.
Erin: If you had a crystal ball, which additional predictions would you make about P2P lending sector in the UK, US and in Europe?
Stuart: I fully expect the big players in the UK market and beyond to be multi-billion pound businesses within the next few years. There will inevitably be some potholes along the journey, whereby we will see some platforms stop operating, and others begin to work more closely together.
I also believe that the ‘alternative’ tag given to the wider sector will become obsolete too. It has been alternative finance for a while now, but we’re now approaching a point that will see platforms, such as ours, become mainstream, and commonplace amongst investment portfolios and businesses’ finance choices alike.