Loans and defaults for ‘open minded’ lender

The self-styled “most open minded lender” Bizcap has written 5,000 loans for small businesses worth about $235,000,000 since its arrival in New Zealand two years ago, but has also had a number of defaults.

Monday, September 18th 2023, 9:20AM

by Sally Lindsay

Australia-based Bizcap is surprised at the level of New Zealand growth in a short time. Chief revenue officer Rebecca del Rio says the second-tier lender has always underestimated its rate of growth. “We’ve only just scratched the surface."

“In reality there are a lot of small to medium businesses (SMEs) in both countries and underserviced owners in the $20 billion industry.”

SMEs account for more than 97% of all New Zealand businesses, employ 29% of workers and generate 28% of GDP according to MBIE.

Del Rio says Bizcap didn't think it would get its business established so fast. “We're doing everything in our power to try and scale in a sustainable, cost effective and responsible way.”

However, it has not been all plain sailing. Nine companies with Bizcap loan agreements were put into receivership by the lender between July 18 and August 28, according to BusinessDesk. Some of the companies were in their “dying days”.

Receivers have already given up on four of the companies that owe Bizcap money, realising they won’t get anything back. Bizcap told the business publication it had exhausted all other options before the receiverships, which amounted to $250,000 across five of the nine companies.

Despite this setback, Del Rio says there are still many small businesses needing flexible funding and which it offers. She says the Bizcap product is definitely not for everybody, but it fits a strong niche offering unsecured loans from $5,000 to $500,000, funded within three hours and secured loans of up to $2 million, funded within 24 hours.

Bizcap is able to do this as it doesn’t rely on institutional money and has no debt facilities, del Rio says. Everything is internally funded by five partners – three in the high net worth range.

No waiting

The last thing a business owner wants is to be rejected by the major banks and/or specialist providers, when applying for a business loan, del Rio says. “Owners may not always have the time or patience to deal with lengthy loan application processes that take two to three weeks.

“Competition for small businesses has never been more aggressive, particularly when financial pressures are piling up. Owners have to take money out of their business to pay increasing interest rates on their mortgages, manage the escalating cost of living and deal with cash flow. Payment terms are also hard due to the length of time it takes to get paid. Running a small business, it's bloody tough and with that, there are always going to be cash flow issues,” says says.

Providing access to funds at a rapid rate thanks to internal funding and not having to go through the red tape other lenders do, has enabled Bizcap to disrupt the market, says del Rio.

“Our credit team has the autonomy to make decisions quickly and fast. So throughout the Covid period, for instance, a lot of the other lenders within the space had to pause lending or reduce their lending capacity quite significantly. As Bizcap is privately owned, we were able to look at the news, health and lockdown details, our data and make decisions and changes to our credit policies hourly, daily, if needed.”

Where Bizcap differs, she says, is dealing with customers who might have existing loan facilities or had poor credit scores, defaults or hardships. “We are an open minded lender.”

Defaults on loans sit within about the 10% range of its New Zealand competitors. “Everybody takes out a loan with the intention to pay it back. Sometimes there is a discrepancy between intention and reality, but generally New Zealanders are good payers.

Tags: Bizcap