European investor Pollen Street Capital invests 35 million EUR in alternative lender Finbee Verslui. This investment will enable more than 1,500 businesses to be financed faster and on more favorable terms than before.

Lending faster and on better terms

“Our mission is to empower the country’s small and medium-sized businesses to grow by providing them with the finance they need. We already have supported over 3,000 customers since inception, with 2,000 active, and have maintained an average annual growth of 60% in loan originations for the last 5 years. We are thankful for the continued support from our investor community to finance these loans, but increasing customer demand has led to a funding gap. Until now, we have been increasing liquidity with our own funds, but this partnership will enable us to grow at much faster pace”, comments Tomas Mačiulaitis, CEO of Finbee Verslui.

He confirms that the company financed more than 27 million EUR in loans last year. This year, the growth rate is expected to be maintained with more than 40 million EUR in new originations: “This additional funding will allow us to fulfil the market demand and grow alongside the many businesses we will support,” says T. Mačiulaitis, adding that with the investor’s funds, Finbee Verslui will be able to offer financing to businesses on more competitive terms.

“First of all, we will be able to pay out business loans much faster. Until now, it used to take over a week to crowdfund larger loans, while now it will take just a few hours from signing the contract to the money being in the account. Moreover, regardless of the customer’s ability to borrow, we had to limit the maximum loan amount based on the liquidity on our platform. This means that if a relatively large business wants to borrow 100,000 EUR and we assessed that it could borrow that amount, we still had to reduce it to 50,000 EUR. Now we will be able to lend as much as the real need is”, says T. Mačiulaitis.

“As across much of Europe, there is increasing entrepreneurship and a growing demand for SME financing as the availability of bank capital is not sufficient to meet the demand. Finbee Verslui have developed an attractive product for Lithuanian SMEs looking to grow and we are excited to support them and their customers on this journey. We have been impressed by the management team and their commitment to prudent lending practices, and we look forward to promoting financial inclusion within the country”, added Ethan Saggu, Investment Director at Pollen Street Capital.

T. Mačiulaitis points out that small companies with up to 10 employees account for about 84% of all legal entities in Lithuania – they are the backbone of the economy, but access to finance remains challenging for this segment. “Because of this partnership, businesses will get the financing they need and we will help them increase their volumes, create jobs, and pay more taxes. Among other things, this is a new investment attracted to Lithuania at a time when there is a lot of talk about foreign investors withdrawing from the region”, notes T. Mačiulaitis.

Among the first in Lithuania

T. Mačiulaitis says that Finbee Verslui is one of the first alternative lenders to attract an institutional investor in Lithuania, but this is common practice worldwide.

“In more developed markets, the opportunities for individuals to invest in peer-to-peer lending platforms have actually decreased significantly as institutional funds have entered the market. For example, the American LendingClub became one of the first P2P platforms in the world that kept increasing the restrictions for private investors, before finally moving fully to funding loans with institutional investors’ money. Another well-known UK platform, ThinCats, has already switched to funding loans only from institutional investors as of December 2019. UK-based company Zopa also started as a P2P platform but eventually became a bank not accessible to retail investors. A similar example is the case of Funding Circle. In Lithuania, we have also been talking about the scenario that private investors will eventually see a decline in business financing offers, so instead we will promote our alternative products – consumer loans and business loans secured by mortgaged real estate or other assets”, Mačiulaitis points out.

According to him, the main reason for this trend is that rapid growth from retail investors alone is hardly possible: “The number of retail investors and their ability to finance loans is growing more slowly. Therefore, companies that want to fulfil the market opportunity are forced to look for institutional money, which allows them to finance large amounts of loans much faster. Over time, working only with retail investors makes it more difficult to grow or at least maintain the same volume of lending. I think this is the natural evolution of business.”