Business transaction funder Butn taps into retail private credit market to pursue growth

Melbourne-based fintech Butn (ASX: BTN), a company that provides transactional funding to small and medium enterprises, has launched its first retail private credit fund in a bid to leverage solid growth in its business over the past year.

Founded and co-led by Rael Ross, Butn is a business-to-business (B2B) transaction funder that operates across multiple asset classes including invoice finance funding, using debt and equity to grow its receivables book.

Ross says the launch of the new retail fund comes on the heels of Butn achieving $2 billion of loan originations since inception in 2018, aided by a 35 per cent year-on-year increase in originations to $145.2 million in FY24.

"This is a significant milestone for Butn, having launched the Retail Private Credit Fund and hitting over $2 billion in originations since inception,” says Ross, the Butn co-CEO and a former winner of the Melbourne Young Entrepreneur Award for the Finance category in 2020 and 2021.

“With a solid track record of consistent double-digit returns, we believe it is the perfect time to allow retail Investors to also share in the success of the Butn model in secured asset backed lending opportunities.

“This launch and subsequent support show the true nature, robustness and popularity of the Butn suite of product offerings.

“We believe this will be the beginning of a new product class as we revolutionise the credit fund space with our original 'Originate to Distribute' full vertical integration model."

Despite a 14 per cent lift in revenue to $13.5 million in FY24, Butn posted an EBITDA loss of $1.4 million.

The statutory loss of $12.3 million was driven by an increase in expected credit loss provisions and the change in useful life of intellectual property, in line with industry standards. Butn expects these non-cash items to be significantly lower in FY25.

Despite the annual loss, Butn posted growth in margins to 2.9 per cent, from 2.7 per cent previously, while maintaining a “low non-recoverable write-off rate of 0.5 per cent of originations”.

Butn says the new retail fund will finance asset-backed lending opportunities, including those originated by Butn, across multiple classes including invoice finance, trade finance, asset finance and property finance.

The fund will be operated by a wholly owned subsidiary of Butn and will accept investments for a minimum one-year term at a fixed rate of 9.5 per cent per annum.

New or existing shareholders in Butn will be eligible to receive bonus interest paid with each distribution, providing they are current shareholders.

Butn says that funds raised via traditional and digital means will be automatically applied to lending opportunities through the company’s distribution channels which include a strategic partnership with MYOB.

Butn says its digital “end-to-end” model allows the company to control its cost of funds and lending capacity while also growing an additional revenue stream for Butn in the retail funds management space.

Under terms of the MYOB agreement secured in 2021, Butn is delivering MYOB a fully integrated invoice funding solution, assisting businesses in managing cashflow and driving growth.

MYOB has an 11.4 per cent stake in Butn, while Regal Funds Management is the largest shareholder with a 31.91 per cent interest. Regal upped its stake in Butn this year following the completion of the company’s $5 million rights issue announced in April.

Butn listed on the ASX in 2021 following a $20 million IPO that offered shares in the company at 50c each. Butn’s shares last sold at 6.2c in morning trading.