Prospa's results show SME originations have returned to pre-pandemic levels

by Mark Rosanes26 Apr 2021

Non-bank lender Prospa has released its quarterly update, revealing that demand for credit among small and mid-size enterprises (SME) have returned to pre-COVID-19 levels faster than anticipated.

The lender continued to post steady growth in loan originations over the quarter ending in March, with $30.8m originated in January, $39.9 m in February, and $50.3m last month.

Overall, the $121m in loan originations were up 20.2% from the previous quarter and largely in line with the $122.2m originated during the prior corresponding period before the pandemic caused disruptions in the SME sector.

Greg Moshal, chief executive officer at Prospa, welcomed the results, saying that the figures showed that the company is maintaining a “good momentum.”

“Prospa has seen better than anticipated growth in originations, driven by stronger economic confidence and investment within the SME sector,” he said. “It is particularly encouraging to see such high levels of activity in the March quarter considering this is typically a quieter period than the busy December holiday season."

Of the total originations for the quarter, 80.8% were from the lender’s small business loans and 19.2% were from its line of credit product.

“The uptick in demand for our Line of Credit product demonstrates the growing desire for flexible funding solutions in this new environment,” said Alex Brgudac, Prospa’s Head of Partnerships. “Small businesses want more flexibility to confidently manage cash flow fluctuations and capitalise on short term opportunities, something brokers should be thinking about when looking at the right funding solutions for their customer.”

The lender’s New Zealand business continued to perform well, registering $19.9m in originations from January to March, up 10.6% from the previous quarter and 21.3% from the same period last year.

Prospa also generated $28.5m in total revenue before transaction costs, rising 2.9% from the prior quarter. This signalled a turnaround point for the business following declines in revenue during the pandemic. However, the figure was still lower than the $37.4m generated on the prior corresponding period, reflecting the company’s deliberate decision “restrain risk appetite.”

For the first time since COVID-19 struck, the lender’s average gross loans rose, hitting $354m in the first three months of the year, up 6.4% from the previous quarter. The figure, however, was lower than last year’s $466.3m. 

“We are pleased with the business momentum Prospa has experienced this quarter, which has been better than anticipated,” Moshal said. “We have also seen a return to growth in the size of the loan book and total revenue. Importantly, this growth is being achieved without materially changing our risk settings, and with our robust balance sheet and funding platform, this should further strengthen our future options.”

“Given the current economic outlook, we are optimistic this growth will gather pace as the year progresses due to the pent-up demand for business investment and the seasonal uplift we usually see in originations towards the end of the financial year,” he said.