Record lending to small businesses could buoy Propell shares

ASX-listed fintech company Propell Holdings Limited could see its share price rise on continued gains in customer numbers and lending volume. The company hopes to provide improved financial access to Australian small businesses with its ‘all-in-one’ digital finance platform.

While Australia’s fintech sector has made waves with buy-now-pay-later (BNPL) platforms, Propell has set its sights on the area of small business lending and improving financial inclusion for mom-and-pop enterprises. In the June quarter, it expanded its product line-up in a bid to provide greater flexibility to small business borrowers.

Record lending in June quarter

In his report for the June quarter, Propell posted impressive gains in customer numbers, lending volumes and loan sizes.

Propell’s platform had over 2,150 small-to-medium enterprise (SME) customers for the June quarter, marking growth of 30% compared to the preceding quarter and a rise of more than 320% compared to the same period last year.

The lending volume for the period reached a record sum of $3.4 million. This represented growth of 35% compared to the previous quarter and a leap of more than 320% on the previous corresponding period.

Propell’s quarterly report indicates that May and June were the company’s largest months on record in terms of lending volume.

In addition to gains in lending volume, Propell also saw average loan size increase to nearly $20,000, for growth of 40% compared to the preceding quarter and more than 278% year-on-year growth.

Propell said that average loan size is a key indicator for business scaling, with expansion indicating that customer quality is improving.

New SME products drive growth

Propell said a key growth driver in the June quarter was the launch of a new credit product that targets the SME market. Its new Business Loan product caters to the needs of ‘Small businesses… underserved by traditional providers’.

The Business Loan is a fixed sum, fixed-term product that provides funds to enterprise customers for purposes such as equipment acquisition and staff overheads. Customers can borrow sums of between $4,000 and $250,000 for 12-month terms using the new product.

It differs from Propell’s existing Line of Credit product, which allows funds that are repaid to be redrawn again up the credit limit and only charges interest on funds that are used. The Line of Credit product is for amounts of between $2,000 and $250,000 and covers periods of either six or 12 months.

Propell has highlighted the speed and convenience of the new Business Loan product, which uses a digital assessment process for borrowers to obtain approval in as little time as 24 hours.

The fintech company said that the product launch would give its SME customers better access to capital and greater flexibility in terms of conditions and usage.

‘Our customers now have more choice and access to capital to operate and grow in the way they want,’ Propell said in its quarterly report.

‘Customers now have increased flexibility with existing Line of Credit facilities, or fixed-term loans at competitive rates with our new Business Loan product.’

Propell’s Business Loan is currently a form of unsecured lending. The company has plans to add a secured option in future, however. This could improve the appeal of the product to SMEs by using collateral to reduce financing costs.

$2.3 million raised via convertible notes

Propell has bolstered its war chest with a capital-raising via the issue of short-term instruments. On 11 July Propell announced that it had entered a Convertible Note Deed with a special purpose vehicle arranged by Reach Markets as lead manager.

The deal raised $2.3 million, with funds to be used to scale up Propell’s business and expand its loan book. Propell said a key focus following the fund-raising will be achieving a breakeven cash flow in the medium term.

The fund-raising and the launch of new products for SMEs have the potential to drive lending levels to new highs, which, if the above analysis and assumptions are correct, could bode well for Propell’s share price.

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