LoanBook is a Spanish platform for crowdlending or marketplace loans—a modality also called p2p lending—specialized in loans for SMEs.
Founded in 2013, the company offers an efficient, transparent and flexible alternative financing channel for companies. It consists of a first-level multidisciplinary team with more than 15 years of experience in the areas of corporate debt, investment and asset management, financial reporting and technology applied to finance.
The originality offered by LoanBook is its online marketplace, based on its own technology and which allows real-time management of a loan portfolio.
AkuaroWorld had the opportunity to talk to James Buckland, founder and CEO at LoanBook about the company:
How did come up with the idea of creating LoanBook?
The origins of LoanBook go back to 2012. I was looking for a profitable way to invest my savings and I came across a new business model gaining momentum in the Anglo-Saxon world, from which I come from. Back then, fintech had been going on in the United Kingdom for a couple of years and it was starting to grow and spread to other European countries.
I thought that Spain, in which 97% of its private sector comprises of SMEs (Small and Medium-sized Enterprises), was a good market to launch a platform such as LoanBook. Five years later, our solid results proved that we hit the right note and we’ve become the leading credit investment platform for SMEs by loan volume.
How does your Marketplace work?
Our online marketplace is the tool that allows all types of investors to participate in loans to mature Spanish SMEs looking for new sources of financing—a highly competitive alternative to conventional investment options such as fixed deposits.
Once the companies share their financing needs with us, we thoroughly analyse each request and, if it meets our criteria, we assign a rating to each new transaction. After that, we publish the loan in our marketplace, in which investors can either cherry-pick those they like the most or create a loan portfolio in order to diversify their risk.
Once the bidding is finished, LoanBook manages the loan, coordinating the payment of the instalments and the recovery, and informing its investors throughout the process.
How does the risk analysis work on the companies?
Each new company and every loan up for auction in our marketplace is reviewed by our risk analysis team. This analysis allows us to estimate the risk level and the probability of loss associated with each loan. Based on the result of this analysis, we determine their duration, amount and interest rate.
As for our rating system, it classifies the loans based on their credit quality. By reflecting in what proportion the company might not be able to repay it, we provide our investors with an estimate annual loss.
We also update our credit ratings on a recurring basis to take into account any significant changes in the companies we loan money to.
What is your business model?
Right now our income comes exclusively from the opening fees we charge to SMEs for studying and approving their loans. These commissions depend on the rating of each loan and its repayment terms, but they never exceed 3% per year and 4% for those to be repaid in 12 months or more.
We currently have a network of more than 970 investors and 320 SMEs. Companies have been particularly loyal to LoanBook, and our current renewal rate is set at 80%.
What make you different from the competition?
The advantages of our value proposition to investor are evident. First of all, we focus on what we do best: financing working capital through short-term loans. Because of that short duration, our investor access good profitability rates combined with a very low and controlled expected loss and high liquidity. Our platform also offers added-value functionalities such as the automatic investment system through mandates, which allows our investors to make diversified investments in a wide range of loans with a predetermined risk profile and continuously reinvests their earnings.
As for the advantages for SMEs, it is worth highlighting that the process to request a loan is very fast. We can analyse companies and determine its ratings and the conditions for their loans in a matter of days, and once they have been approved the companies receive the funds almost immediately thanks to our own pre-financing line.
Last but not least, we benefit from our partnership with Lemon Way: a payment entity responsible for performing all the payment services of our marketplace which provides an independent and secure environment both to investors and SMEs.
How do you provide assistance to companies so that they can obtain financing?
The SMEs which we work with are solid. They have revenues of between €400,000 and €10 million, they have been operating for three years or more and they have turned a profit over the last year. Usually, they come to us because they want to complement pre-existing credit lines and to diversify their sources of financing. Some of them want to be less dependant on banks, try their hands at alternative financing or react to the wave of mergers among Spanish banks. Most of them become loyal to LoanBook based on the speed, ease of use and transparency of our marketplace.
The three loan products that we offer to SMEs are: working capital loans of up to €100,000, to be repaid from 3 and up in 24 months; lines of credit with one or more provisions of lines of up to €100,000 euros; and financing of promissory notes of between €5,000 and €50,000.
In your opinion, what are the fields in which most Startups are being developed in 2018?
Regarding the fintech segment, in which we operate, I believe that one of the most talked-about areas this year will be blockchain. We are also following closely the increased use of Big Data and the advances in both the Internet of Things (IoT) and Artificial Intelligence (AI). We believe our peers do too.
What are your future plans for 2018?
LoanBook wants and is set to continue leading the lending sector in Spain. To do so, we will continue to rely on a committed team with a strong financial experience in both asset management and commercial banking, which gives us the ability to innovate and access a wide range of investors—including large institutions and sophisticated family offices and investment firms.
After almost five years, in which we have built a technological platform catering of the needs of both retail and sophisticated investors, we have brokered more than €43.5 million through 750 loans to more than 320 SMEs. Based on those credentials, we expect to start growing more quickly thanks to our track record and the appetite of both domestic and foreign investors in our value proposition.
We also want to continue improving the efficiency of our marketplace. We’ll do that by innovating and constantly improving our risk model, and by leveraging new technologies to have a better understanding of the financial situation of the companies we work with.