The company has completed over $10m worth of deals in the eight months to end of 2017.
When Banama Corporation was seeking financing to pay suppliers to meet rising customer demand, it had limited options due to its negative shareholder equity position with losses in its last two financial years. It did not help that Banama was in the coal mining industry, which has been in the tough cycle in the past few years, making the prospect of lending to Banama unattractive to most financial institutions. But not to Minterest, a Singapore-based digital peer-to-business lending platform, which connects small businesses to investors.
"Due to historical financials they were unable to secure bank financing and had to rely on family support," said Charis Liau, CEO and co-founder of Minterest, of the predicament that Banama faced - and the kind of challenge that their platform was made to overcome. Minterest was able to complete a deal with Banama and established a repeat lending relationship. "The client has returned to do three more deals with interest rate reducing as it builds a track record with the members on the Minterest platform," said Liau. "Subsequent loan requests were taken up at an increasing pace, the last being fully subscribed in 13 minutes."
Through its unique approach to deal structuring and the guidance of a management team that has more than 125 years in banking and finance, Minterest has completed over $10m worth of deals in the eight months to end of 2017, according to Liau, which established the startup with two other veteran former bankers, Ronnie Chia and Loo Wei Choong. And the platform is looking to further build momentum leading up to a strong fundraising milestone next year.
"The initial response was very encouraging with deals completed quickly for borrowers while delivering good, attractive returns to investors,” she added. “Funding for Minterest is currently from founders and seed investors. Together with strategic investors' funding, Minterest has enough runway for its expansion plans before undertaking a series A round in 2019.”
Proprietary credit scoring system
Liau credits Minterest’s key strength to the way it processes deals. The lending platform has developed a proprietary credit scoring system, called MintGrade, to assess deals, taking into account the business and financial risks of each borrower and their respective financing requirements. “We utilise not only quantitative data, but also qualitative observations obtained during the due diligence process,” the co-founder said. “More than 200 data points are processed through our proprietary model to generate a MintGrade rating. Only deals that pass our criteria are listed online for members to invest in.”
The easy application process also serves to attract more borrowers and investors. After signing up online and submitting verification documents, as well as completing a know-your-customer, or KYC, process, investors can start topping up their e-wallets and participate in business loans offered by the SME borrowers. The platform matches investors with borrowers where loans are made, and present investment options from as low as $1,000 with interest rates that range from 12% to 18% per annum, and tenure of up to 12 months. Investments can be monitored real-time on a dashboard, whilst loan documentation is uploaded online for easy safekeeping.
For SME borrowers, Liau said Minterest promises the efficient raising of financing, and quick securing funds within two weeks. A combination of automatic screening and face-to-face meetings enables the platform to better understand the SME’s financing requirements, debt sizing and repayment capability. KYC and MintGrade credit assessments are made, then the startup prepares a loan request fact sheet detailing the borrower’s profile, management, financials, repayment capabilities and additional loan terms. This is then listed so investor members can participate. A portfolio management team monitors repayments after loan imbursement.
“There is a very large credit gap in the market which traditionally banks are not serving,” said Liau. “We aim to fill that gap. And provide our investors with well-structured, risk-mitigated transactions they can invest in, so as to build a diversified portfolio over time.”
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