Prospa flags ‘opportunity’ for brokers to help SMEs

Complementing Prospa’s first-quarter originations result was its revenue for the period reaching a record $63.7 million, a 69 per cent increase on pcp (1Q22: $37.8 million), it confirmed.

Prospa achieved lifetime originations of $3 billion during 1Q23, reflecting a sharp acceleration in growth after hitting $2 billion less than two years ago, it explained.

“The current environment is definitely a great opportunity for brokers to be reaching out to small business clients to discuss their future plans and the range of flexible funding solutions available to them,” stated Beau Bertoli, Prospa chief revenue officer and executive director.

In its trading update for the quarter ended 30 September 2022 (released Wednesday, 26 October), the company said it is pleased to have demonstrated strong top-line growth in a historically slower quarter despite general uncertainty from small businesses in the broader economy.

Group highlights included:

• Record first-quarter originations of $205.5 million, up 60 per cent on pcp (1Q22: $128.4 million), in a historically slower period for Prospa
• Closing gross loans for the quarter increased to $768.3 million, up 74 per cent on pcp (Q1 FY22: $442.2 million)
• Revenue for the quarter reached $63.7 million, a 69 per cent increase on pcp (Q1 FY22: $37.8 million), representing a record first quarter for revenue
• Active customers grew by approximately 11 per cent to 17,900, an increase of around 1,900 from the previous quarter
• Continued focus on the credit quality of the loan book and maintaining the 4–6 per cent board-mandated static loss levels
• “Carefully managing” through a rising rate environment with persistent inflationary pressures, as conditions for small businesses remain uncertain
• Yield maintained at 34.4 per cent (4Q22: 34.1 per cent), while net interest margin (NIM) for the quarter was marginally lower at 29.2 per cent v the previous quarter of 30.3 per cent

Continued focus on loan book performance

Prospa co-founder and chief executive Greg Moshal said: “We have capitalised on sustained demand across Australia and New Zealand, highlighted by record first quarter results in originations, revenue and active customers in a period that is historically slower.

“Our business continues to witness underlying momentum. Focus remains on managing the overall credit performance of the loan book, as we observe some volatility from small business owners across Australia and New Zealand as economic conditions continue to evolve.

“Progress on our product roadmap continues with positive insights coming from our customers and partners as new offerings are released leveraging elements of our new technology stack.

“Further business account features will be rolled out over the quarter ahead which we’re really excited about.”

Managing and funding portfolios

According to the company, during these uncertain times it is taking “proactive measures to manage credit performance” in certain segments of its portfolio.

Early indications are that Expected Credit Losses (ECL) in specific cohorts are, “approaching the higher end of its board-mandated range.” Prospa has initiated adjustments to risk and commercial settings as part of its dynamic portfolio management program, it explained.

“As interest rates continue to rise, Prospa’s cost of funds is increasing, resulting in its net interest margin (NIM) being marginally lower for the quarter at 29.2 per cent compared to 30.3 per cent in the previous quarter,” it stated.

In July, Prospa upsized one of its Australian warehouse facilities from $67.5 million to $135.0 million, it confirmed.

Looking further down the track

Profitable growth and customer focus are at the core of Prospa’s business, and the Company remains focused on maintaining its position as “the premier online lender to small business”, it stated.

“The Company will continue its prudent approach in managing the credit quality of the loan book using its dynamic credit decision capabilities, remaining committed to delivering stable yield for FY23 and further operational efficiencies.”

Prospa continues to “deliver innovative digital cash flow management tools, leveraging its new re-platform capability,” it said.

In August 2022 it launched a new mobile application to further improve the customer’s experience, it added.

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[Related: Diversification more important now than ever, says business coach]