Sprint Financial recruiting peer to peer lenders in $50m hunt for capital
Sprint Financial Services Limited, a four-year-old microfinance company, is attempting to create a network of peer-to-peer lenders, with itself as the intermediary.
The company is seeking a maximum of $50 million from a pool of lenders who, in turn, are being promised a return of 12.5 per cent per annum, says CEO Christopher Paul Barrett.
The peer-to-peer network, for which Sprint has began recruiting via press advertisements, will allow the company to grow its loan portfolio via a novel and untested means of raising capital. Basically, Sprint will match lenders and borrowers and administer the loans.
"We are lending, not investing," said Barrett. "It's the first time I have done it ... we are looking to raise capital, which is natural."
Barrett, before taking the helm at Sprint was director of Global Courier Services, an online shopping company which was bought by Mailpac, another online shopping competitor, in 2011.
To date, Sprint has completed loans valued at $48 million with an annual growth rate of 30 per cent per annum, said the CEO. He noted that the company now has 565 active loans and a 98 per cent repeat rate, and that its loan book is now worth about $32.5 million.
"Our current demand is exceeding our supply which is good news, but it can also be bad when you can't expand, hence the advertisement. We are trying to get some lenders in so we can leverage and get the funds out," Barrett said.
Located on Barbican Road in Kingston, Sprint offers personal loans, small business loans, debt consolidation, recreation, auto and education loans.
Barrett said standard operating procedures, which include physically checking for residence and place of business of Sprint's clientele, and securing collateral for the loans, have ensured that defaults are no more than two per cent of portfolio.
"Our portfolio at risk (PAR) is 1.06 per cent. Our 30-day PAR is 1.08 per cent and for seven days, PAR is 2.27 per cent. This is actually very, very good, given that the industry standard for MFI's is 15 per cent in PAR," the Sprint CEO said.
Sprint's loans range between $10,000 and $100,000, repayable in eight months at interest rates ranging from four to six per cent per month, but the average amount borrowed is $50,000.
Eighty per cent of clients are micro business owners, and the rest are employed persons. Women comprise 56 per cent of borrowers.
"We are lending to individuals who are [often] unbanked in the sense that they can't get traditional loans because they lack paperwork. We assist the client in growth of the business by way of cash loans at very competitive interest rates. They then have a certain period of time which is flexible for them to pay back," said Barrett.
Under the peer lending network he aims to build, the Sprint Financial head said his company would physically check where clients live and work, interview neighbours, photograph collateral and micro business clients, conduct reference and credit checks, and do collections when necessary.
"We also use the NSIPP website to make sure that the collateral used is not being used for another loan. With the credit score generated, we do a risk assessment," he said.
Sprint itself expects to make more than three times the returns it promises to lenders.
"The 12.5 per cent that they get back, it's very good for them," he said, comparing the figure to bank returns on deposits. "We make 45 per cent - everybody wins!" the microfinancier declared.
"If you look at the market today and what the interest yields are ... the average you get per annum now is between four and six per cent. You are making 7.5 per cent above market [at Sprint]. If you put it in the bank, that's five per cent," he said.