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Prospa still ‘evaluating’ when to float

by Annie Kane6 minute read

The SME lender has said that while it is well capitalised, it will “keep evaluating” timings regarding a potential initial public offering.

Prospa was scheduled to start trading on the Australian Securities Exchange (ASX) in June last year, with a market capitalisation of $576 million after raising $146.5 million through its initial public offering.

However, minutes before listing, the lender revealed in a disclosure to the ASX that there would be a 48-hour delay so that it could “clarify queries raised by ASIC [on Tuesday] in relation to Prospa’s small business loan terms”.

The lender further noted that these questions were “in the context of an industry-wide review” into unfair small business loan terms. The SME lender has since undertaken a full review and update of its loan terms and became a founding signatory of the Online Small Business Lenders Code of Practice that aims help make SME loans more transparent and easy to understand.

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While the lender indefinitely postponed the float last year, co-founder and joint CEO of Prospa, Greg Moshal, recently told The Adviser that while there is “no urgency” to list the company on the ASX, an IPO may still be on the cards.

Mr Moshal said: “At this stage, we are fortunate just to be well capitalised. So, we raised $43.3 million late last year and that has put us in a very strong position to continue with the momentum, to meet our capital needs to continue helping our very large and growing customer base so we have no urgency to move to public markets.

“But, we have definitely demonstrated that we have an interest in public markets and we will keep evaluating. When the time is right we will be likely to revisit,” he said.

Mr Moshal went on to note that several lenders have recently increased interest rates off the back of rising funding costs. Adding that funding costs is something all lenders have to “bear in mind” and that an increase in funding costs often results in a hike in interest rates for borrowers, Mr Moshal added that Prospa had been able to buck the trend.

For Prospa specifically, for each year of our existence we have been able to reduce our pricing. What is important to us is that, as we have been able to grow, we have been able to continue to scale our business. As we have been able to broaden our partnerships and our introducer reach to actually reach more and more customers, we absolutely have seen that we have been able to get economies of scale, reduce our costs, and we’ve always chosen to pass those on to our customers to get them continued better pricing and better solutions.”

The Prospa joint CEO said: “I think we are constantly looking at areas where, even through our funding efficiencies or other areas that captial can come to the market, we can keep improving that cost of funds.”

Mr Moshal added that the recent $2-billion Australian Business Securitisation Fund programme was “a great example of government getting behind it” but continued: “We think it will not be government alone, but a combination of government and the private sector that will help solve the capital needs of small businesses.

“But for Prospa as a whole, we’re consistently looking at reducing our pricing even at a time of reduced interest rates.”

Mr Moshal’s comments follow on from the release of new research into the economic impact of its lending to small businesses in Australia.

According to the economic impact assessment, undertaken by Prospa in partnership with RFi Group and the Centre for International Economics (CIE), the small business lender has lent almost $920 million to more than 18,000 Australian business since 2012.

The research then modelled the flow-on effect of Prospa’s lending to understand how it is impacting small business and the economy in general.

The findings were arrived at after asking Prospa customers how much lower their revenue would be without their Prospa loan, and extrapolating that out on a national level.

According to the research, the lender has therefore contributed $3.65 billion to nominal Australian GDP and resulted in more than 52,000 annual full-time positions being maintained over the past five years.

[Related: SME lender backs ‘invaluable’ brokers]

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Annie Kane

Annie Kane

AUTHOR

Annie Kane is the editor of The Adviser and Mortgage Business.

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