Minterest: Marketplace Financing for Underserved Businesses
Tired of your bank saying no to you? Whether it is for business expansion or working capital requirements, small & medium sized companies (“SMEs”) face challenges in bridging the financing gap. Fortunately, there is a great way for these companies to raise funds effectively to meet their business needs. “However, not many companies are aware of marketplace funding,” begins Charis Liau, co-founder and CEO of Minterest. The majority of SMEs today are still struggling to access finance effectively. The key obstacles are the “one size fits all” and “no-go industry sectors” approaches taken by traditional finance providers as well as lack of financial track record of SMEs. These barriers have resulted in the emergence of a huge credit gap–banks, with high cost structures and strict regulatory compliance requirements, are unable to serve the needs of these corporate effectively. Driven by the zeal to empower both borrowers and investors, Singapore-based Minterest has built a user friendly online funding platform with a proprietary workflow and credit scoring algorithm (“MintGrade”) enabling the quick and efficient processing of loan requests. “Our ultimate aim is to fill the credit gap by on-boarding the creditworthy borrowers and providing investors with well-structured, risk-mitigated investments,” enthused Charis.
Minterest along with four members of the Singapore FinTech Association founded a marketplace lending sub-committee with a vision to create industry standards and spread awareness about marketplace financing through education and publicity.
The experience of the team allows Minterest to provide a variety of financing solutions to its borrowers. These are divided into four broad categories: (i) working capital loans that allow borrowers to borrow for business expansion, finance a purchase order or project, (ii) invoice financing allowing borrowers to recycle their cash flow effectively, (iii) structured loans where structural elements are incorporated into the facilities e.g. insurance cover or physical assets as collateral, and (iv) convertible loans where quasi-equity raising is more appropriate for the borrowers enabling them to fuel their growth without the pressure of making scheduled debt payments. “We are also breaking new ground by introducing psychographic tests which will add a new dimension to our credit assessment. The psychographic test enables us to determine the “willingness” of the borrower and/or the promoters in repaying a debt,” adds Charis.
To better highlight Minterest’s value proposition, Charis cites the case of Banama Corporation Pte Ltd, a Singapore company with Indonesia-based operations serving the coal mining industry. Banama was not spared by the difficulties facing the coal mining industry and this led to the company recording significant losses. Equity was negatively affected leaving Banama without any access to financing from banks and had to rely on support from family and friends. Minterest’s partnership and unique approach to structuring a series of loans for Banama enabled it to raise financing with progressively lower financing costs as it built a track record with investors on the Minterest platform. “Subsequent loan requests were participated quickly, the last one being fully taken up in 13 minutes,” extols Charis.
The company also intends to integrate blockchain into their investment process to provide a powerful audit trail and recording capability that will enable users to reduce errors and protect data from being tampered. “With a robust technology suite and depth of our financial expertise, we are dedicated to stirring a change in the fintech space and assisting our SMEs which are the workhorses of the region’s economy,” ends Charis.