Propell secures lower funding, taps market for cap raise as business soars exponentially
The reduction in wholesale funding costs will allow Propell to increase its bottom line margins as it seeks to become profitable.
Australian fintech company Propell (ASX: PHL) is entering a rapid growth trajectory phase, and could be well on its way to becoming profitable.
In the last quarter, the SME-focused fintech saw its customer base grow by 35%, which has multiplied by five times since its IPO in April last year.
The company also saw significant growth in its lending book, which increased by 211% quarter-on-quarter.
To fund this exponentially growing business, Propell has just struck an agreement with its wholesale facility provider to double the existing funding facility to $5m.
The agreed three-year loan facility will carry an interest rate of 11.5% per annum, which is a substantial reduction from the previous rate of 13%.
Propell says the much lower funding rate will deliver a meaningful improvement to gross profit margins, and its bottom line.
In addition, the company is also tapping the market for a cap raise, and has already received firm commitments for a $1.36 million placement at $0.058 per share.
The placement will be followed by an entitlement offer of up to $2.22 million to existing shareholders under the same terms, as Propell gets ready to ramp up its lending book further.
Propell believes that small businesses are often left under-serviced by traditional lenders, and are always searching for alternative solutions to their finance needs.
These SMEs also face numerous other problems, including providing payment options to customers, and getting real insights into their business and financial health.
All this traditionally required significant time, resources and knowledge to solve.
Propell came up with a novel platform in 2020 to address this market gap, becoming Australia’s first and only SME-focused fintech platform which offers an all-in-one offering in lending, insights, and payment solutions through one product.
The company says it has no immediate competitors in the market at present.
By using the Propell platform, SME clients can generate instantaneous business insights based on their bank and cash flow data.
They can also access credit lines of up to $250,000, and provide their own customers with a range of payment options all through the one platform.
The Propell platform has grown exponentially since launch, and right now there are 1,700 SMEs across Australia already using it.
Propell believes the total addressable market could be as high as 2 million SMEs, providing it with a long runway ahead.
Underpinning this rapid growth is its partnerships with leading global players in the industry including Square, Stripe, and Zip.
In the past 12 months, Propell has successfully reduced its cost of customer acquisition while maintaining its sizable profit margins
The current business model delivers $2.5-$3 million in revenue and $1-$1.2 million in gross profits from a lending book of only $10 million.
Looking ahead, Propell says it’s targeting growing its loan book to $30m as it prepares for a possible international expansion, and an aspirational goal of growing its customer base to more than 100,000 in the coming years.
To achieve this, Propell is focusing its efforts on leveraging its scalable digital technology, while securing a lower funding cost that is a critical element to this goal.
The latest funding reduction will allow Propell to continue to scale, while still improving the financing component of its platform. Propell says it’s also in discussions with other third-party wholesale lenders to increase the funding facilities available to the company for the long term.
Propell’s platform has a considerable first-mover advantage, and the business is forecasting its customer base to reach greater than 3,000 by the end of 2022.
This article was developed in collaboration with Propell, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.