Short-term lender Funding.com.au has raised $37.5 million in debt and equity capital as it looks to cement itself as a reputable non-bank lender within the finance industry.
MA Financial (ASX: MAF), which has become the online mortgage marketplace’s first institutional debt investor, will provide a senior debt facility to help Funding diversify its capital base and scale its short-term mortgage finance operations.
Funding’s long-term anchor investor EVP, a venture capital firm focused on early-stage business-to-business Software as a Service (SaaS) and marketplace companies, doubled down on its 2019 $3.7 million Series A equity investment with a further $2.5 million.
“We’re pretty wrapped to have MA Financial come onboard as they are a pretty heavy brand name to have alongside us,” founder and CEO of Funding Jack O’Reilly told Business News Australia.
“MA Financial are not only in the mortgage industry, but they also just bought an aggregator called Finsure, and another lender MKM Capital, so they’re pretty active in this space, let alone all the other industries and the billions in management that they operate with or manage.
“We’re chuffed to have them on as a partner, and the EVP side – they’ve just been so supportive of us, so it’s really good to get it over the line and continue the growth after bringing on really valued investors into the company.”
Founded in 2015, the business identified a gap in the market for short-term mortgage solutions that were being overlooked by the big banks and often serviced by unscrupulous lenders, leaving borrowers in financial difficulty.
In contrast to some of the larger banks' longer turnaround times, Funding’s typical turnaround from application to settlement is three to five days.
“The big banks are geared up to write mass volume 30-year home loans to the best clients with the best credit scores; they don't really do out of the box,” O’Reilly said.
“We have clients come to us for mainly two reasons, first is speed - they know that their bank isn't going to be able to settle in time. Time and time again, we see clients call up in a panic with their settlement in four days - their bank has approved them, but the funds won't be ready for another three weeks.
‘Secondly, they are coming to us because they don't want to deal with all the paperwork or the red tape that you have to go through with the banks.
Funding’s borrowers pay around seven per cent for their fast short-term solution, a premium compared to a long-term mortgage product in the three to four per cent pa but cheaper than rivals options like credit cards or personal loans.
“Funding is replicating what has been achieved in the unsecured space with numerous personal and small business financiers providing trusted online solutions,” EVP investment director Daniel Szekely, who also sits on the Funding board of directors, said.
“Achieving this with secured lending is far more challenging, but where delivered, it provides a solution that is far more cost efficient for borrowers. The market opportunity is enormous and it is drastically underserved by the banks that simply cannot write loans efficiently and cannot serve the short-term market.
“People who want to borrow money for a short time are paying too much interest, often on harsh terms. Jack and the Funding team have shown their ability to meet the market demand using technology to do what traditional lenders have always done, but at a much larger scale, faster, cheaper, within a trusted environment and now backed by MA Financial Group.”
With $6.9 billion in assets under management, MA Financial specialises in asset management, lending, corporate advisory, and equities. Since 2009, it has advised on over $100 billion of transactions and raised over $12 billion of equity capital for its clients.
“We are pleased to be partnering with a business using technology to bring a more cost efficient and effective solution to Australian borrowers,” MA Financial group investment director Guy Kaufman said.
“The senior debt facility provided by our fund aligns with our broader private debt investment strategy offering financing to businesses backed by resilient collateral with a strong and proven performance track record.”
O’Reilly acknowledges the deal allows Funding to diversify its capital base and gives them a pretty big feather in its cap or tick of approval.
“It's about really accelerating into that mortgage broker space, providing our product to their clients. It's a good time for it because five years ago private lending has been a pretty shady side of the current mortgage space,” O’Reilly said.
“Mortgage brokers and borrowers didn't really know about it, but now it's really in the limelight and our mission is to be that number one trusted transparent lender in the space.”
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