A non-bank lender has pointed to its quarterly trading update as proof demand for credit is returning to the SME sector faster than anticipated.
Prospa reported a steady uplift in originations over the quarter ending 31 December, with $19.6m originated in October, $32.4m in November and $46.6m in December. Overall, the group saw a 25.9% increase in originations from the previous quarter.
Prospa CEO Greg Moshal welcomed the figures, celebrating that small business demand for capital is “increasing faster than we had previously expected”.
“It is particularly significant that demand for our products has grown following the conclusion of the Government Guarantee Scheme at the end of September,” Moshal said.
“Our New Zealand operations continue to go from strength to strength, having our busiest ever month in December, benefitting from the country’s earlier recovery from the impact of COVID,” he added.
In New Zealand, Prospa achieved originations of A$18.0 million, up 200% on the prior quarter and up 25.0% on the prior corresponding period.
However, the group reported its total revenue before transaction costs was down 1.4% from the quarter before and down 24.5% on the prior corresponding period, reflecting the company’s “deliberate decision to restrain risk appetite”.
“We took a proactive role as a responsible lender for the SME sector during the pandemic and adjusted our credit risk assessment accordingly to ensure we are now in the strongest position possible to support small businesses as demand for capital returns,” Moshal explained.
“This deliberately restrained risk appetite at the height of the pandemic (particularly during the fourth quarter of FY20) had resulted in a reduction of Average Gross Loans for the first half of FY21.
Average Gross Loans of $332.8m for 2Q21 were down 23.8% on the prior corresponding period, a result of lower originations at the height of the pandemic. Similarly, active customers dipped from 11,800 to 11,300 as fewer borrowers were acquired at the height of the pandemic and others with outstanding loans finished their repayments.
However, Moshal is confident the group’s balance sheet will return to growth in the second half of the year as originations continue to improve.
“Today’s results demonstrate that the greenshoots of improved confidence within the SME sector that we saw in first quarter have now planted deeper roots and are beginning to take hold,” he said.
“As economic conditions continue to strengthen in Australia and New Zealand, we believe now is the right time to invest in our short and long term growth by increasing investment in research and development, and sales and marketing.
“Our vision is to further enhance Prospa’s award-winning product set to include an integrated suite of solutions that bring us into more frequent contact with our customers, ingraining ourselves in the payments and transactions that make up their business,” Moshal finished.