Founded in 2016 by three experienced finance professionals, we, Minterest, seek to empower small businesses by connecting them with individual investors through marketplace lending platform. Till date, we have raised more than S$32 million in small business loans. To find out more about our success and future plans, ValueChampion interviewed our Co-Founder and CEO Charis Liau.
Minterest was incorporated in March 2016 and commenced operations in May 2017 after securing its Capital Markets Services (CMS) Licence from the Monetary Authority of Singapore (MAS) in January 2017. Since May 2017, Minterest has assisted businesses in Singapore that were underserved by the conventional financial institutions by disbursing more than S$32 million in loans over almost 90 different transactions.
Minterest was initially funded by the founders and prior to commencing operations, we secured seed funding from friends and family. This took place over a week which was relatively quick.
The biggest challenge at that time was that we just had a concept with no operating history to prove that the business can be successful. But once we shared our vision, mission and how we plan to execute them, the investors were convinced. The fact that the founders and senior management team have significant banking and financial experience (125 years in total) provided another layer of comfort to the investors that we know what we were talking about.
We have not had to raise additional funding so far but the time has come for us to do so. As we move into the second half of our second year in operations, additional resources would be required for further technology build-out, marketing and other operational matters as we seek to scale our business and expand to the region. We now have a viable business model and having proven the business concept, it is now time to move into the next stage of our business evolution.
Minterest has only raised equity so far and will be looking to do the same in our next round of financing. For the new round of financing, we will be looking at VCs and a couple of investors who have supported us during our growing period over the last 18 months. The equity that was raised was important for the business as it provided financing for operations as well as the necessary capital base that is required by the MAS.
We bring the big corporate fundraising experience to small businesses given our deep and broad banking and financial experience. Our borrowers’ journey includes a reasonably in-depth analysis of future cash flows. Not only does this exercise assist in our credit assessment of the borrower’s ability to repay the loan, it also helps the borrower’s management to better understand how their expected cash position would be like in the future. Some of our borrowers have continued to use this tool to measure how well their forecasting is when matched against actual numbers.
Minterest distinguishes itself from others through the following “3P”s:
Former bankers with a combined 155 years’ of experience who understand credit, structuring and security mechanisms. Platform investors invest with the knowledge that every deal is properly assessed and put through our proprietary Mintgrade credit scoring algorithm.
A wide range of products across all risk spectrum to feed the appetite of platform investors, allowing them to diversify their portfolio. Products are divided into four broad categories – Small Loans, Invoice Financing, Structured Loans and Convertible Loans. The diversity of products generally leads to stickiness amongst the platform investors.
A set of transparent and clear processes to analyse and assess loan applications. The automated workflow that was developed in-house allows the team to quickly assess and process deals – this applies to all product categories. We have also developed a credit scoring engine that assign a rating to every loan application. The rating system is much appreciated by our investors as it provides a quick snapshot of the risk profile of the loans that are listed on the platform.
It is important that start-ups have a clear vision and mission and how they are going to execute on them. Without identifiable cash flow sources, it will be very difficult for such companies to raise financing especially in the debt space. There could be a possibility to raise equity financing but investors need to be convinced that the people and business model are right and can be differentiated against competitors.
Singapore as Minterest’s headquarters is a natural choice. The founders are based in Singapore and it is also a major financial centre and fintech hub in the region. The regulatory regime is forward looking and is conducive for a business like ours to grow and flourish. With high regulatory standards ensuring our processes are of the highest standards, we will then bring these standards to other countries as we seek to provide our services to the unserved and underserved businesses in the region.
The most challenging aspect is in the deal selection process. We see hundreds of loan applications each month and whilst many have interesting ideas and products, it is important not to lose sight of the most important criteria for loan approvals – cashflows. We have developed our proprietary screening model taking into account over 200 data points to assess each deal. Structuring of repayment sources is critical in our opinion as we need to ensure that the loans can be repaid on time to our investors.
The most rewarding part is when we disburse a loan to a small business knowing that the proceeds will be used to turbo-charge the borrowers’ business, allowing them to continue to provide employment to the Singapore workforce and contribute positively to the country’s economy.
This article was contributed by ValueChampion.