An interview with Loanpad
LS = Louis schwartz – CEO
NM = Neil Maurice – COO & CFO
Robert Murray-Brown of ECF Buzz sat down (virtually) with the new disruptive Fintech, Loanpad, to talk about their start up journey and what they hope the future holds.
Q – Loanpad was founded in 2016 but you held back on the soft launch until 2019. Do you think that caution has helped you and why?
LS: I wouldn’t say the delay was down to caution but rather the planning phase for our business, the FCA authorisation process and the build of our bespoke technology which of course required rigorous testing. With that said, it certainly gave us time to sit back and assess the market and it became increasingly clear that our USPs needed to be lower-risk and simplicity.
NM: I joined the business in 2018 just a few months before FCA authorisation was granted. It was a period of immense change in the peer-to-peer lending market not to mention the wider economy. These changes gave us some time to assess the market whilst conducting software testing and building in new features that we made available at launch in early 2019. We firmly believe that reputation is everything and therefore we took a few extra months to launch with a more tailored offering.
Q – How has the Pandemic altered your plans and how have you all coped with remote office working?
LS: The pandemic certainly caused some disruption in the second quarter of 2020. Since then, however, we have seen very strong growth, far stronger than before the pandemic. We think that with the current uncertainty in the wider economy, a model like ours (lower-risk) is even more attractive. Coupled with the fact that other platforms have dis-continued retail lending, we see a huge opportunity for continued growth.
NM: When we built out 3-year forecasts from launch, we certainly did not foresee a global pandemic in the middle of it. Nonetheless, the Pandemic has given us the opportunity to demonstrate the resilience and strength of our business model and I am delighted that we have seen continued growth.
As a Fintech, we built our business from the outset to allow and support flexible working which meant we were able to adapt extremely quickly to remote-working. We continue to share ideas and work together daily like we did before albeit virtually instead of in-person.
Q -The P2P market has grown and then retrenched somewhat on the back of some poor results from some of the larger players. What is it about Loanpad and your management which makes you different?
LS: From a lender’s perspective, our main USP is that our investors are very heavily sheltered from any losses. Our maximum LTV is 50% and current average is c.40%. So we think many investors have opted to go down the risk-curve (from higher-risk p2p providers) and look for something with additional protection like Loanpad offers. In addition, the experience and first-loss support provided by our lending partners appeals to many lenders.
From a business perspective, the fact that that we work with professional lending businesses means that a) we have a huge cost advantage relative to our peers in respect of loan administration and management and b) we can scale at a much quicker speed than would be the case if we were originating loans directly in the marketplace.
NM: We were fortunate to come into the industry slightly later than others. We sought to keep our costs low and focus on building a stable, profitable business at a sustainable rate of growth.
We strongly believe that the team is our greatest asset. Many of the team has either worked together or known each other for over two decades. We come from a wide range of backgrounds including lawyers, accountants, software developers, bankers and entrepreneurs. This eclectic mix means that we are able to see opportunities from all angles and the team has developed a very close working relationship over the years.
Q – How hard was it getting full FCA and ISA approvals
LS: The FCA authorisation process took some time as our application spanned some significant changes in the regulatory approach in the peer-to-peer industry. We continue to have an excellent relationship with the FCA. We strongly support the FCA’s authorisation process in that only the right businesses with appropriate compliance and operational functions led by experienced management become authorised.
The ISA Manager approval process came after the FCA approval process and took less time. However, being an ISA Manager requires strong operational processes to not only manage ISAs but also to report on them as required by HMRC.
Q – Which would you say is more important for a start up – a great idea or a great team……and why?
LS: They are both important of course. I would have to say a great team is more important though. Put simply, a bad team could make a mess of even the best idea. Our team comes from different backgrounds which provides a variety of perspectives when considering changes or new features.
NM: That’s a tough one! I would say a great team. Building a start-up is a life-changing, amazing experience. It’s extremely hard work and you get to know the team (and their families) as part of the journey. Given what it entails, I would only be interested in building a start-up with a great team. I am beyond fortunate that we have a fantastic team at Loanpad who continue to dedicate their time and energy to building a world-class business.
Q – Many start ups fail because they simply run out of cash – either through over trading, lack of sales volume or control of their GPM or all three. Is controlling the impressive expansion of Loanpad to date an important part of your success?
LS: As a retail lending platform, it is important that both sides of the business (investors / loans) grow together. Whilst our model allows some flexibility with this, it is not something that can be built too quickly without reducing quality. We are very happy with our growth rate (over 150% in 2020) and would hope to see similar levels of growth moving forward.
We are strong believers in building a business on solid foundations. We keep daily control over our costs and margins are now close to operational break-even.
NM: Absolutely. The age-old expression of ‘cash is king’ is paramount. We are trusted with investors’ money and that trust comes with a responsibility to ensure that we run a stable and compliant business where we never compromise quality.
Q – On expansion do you have plans to tackle new markets – say for example Europe?
LS: We would like to enter new markets one day, yes. However, as our home market offers considerable room for growth our focus is very firmly there for the foreseeable future.
Q – If there was one thing you could ask the Government to do to help start ups like yours, what would that be?
LS: Boost the scope and benefit of SEIS and EIS. For example, increasing EIS allowance to 50% which I think would give a considerable boost to promising start-ups by encouraging more people to back them.
Q – And finally when the day is over, what book or music do you turn to, to relax and recharge the batteries?
LS: It seems to be increasingly hard to find time for either but I do love listening to many kinds of music if I had to pick a favourite it would probably be the Beatles. As for reading, I am not one for fiction, I prefer to read factual biographies or educational materials.
NM: Given the current pandemic, any relaxation time is largely taken up by home-schooling and acting as IT home-support for my four young children! However, when time allows, I enjoy reading crime novels and dystopian literature. As for music, my playlist appears to be stuck on anything from the 90’s.