News & Analysis

Australian small business lending marketplace Bigstone secures $3 million in seed funding

- August 9, 2016 3 MIN READ

Australian small business lending marketplace Bigstone has secured $3 million in a seed funding round led by CVC Limited, Lighthouse Venture Partners and Australian private investors. The funds will be used to fuel expansion and extend the reach of the fintech’s small business loan market capabilities.

Bigstone first launched its service in June to offer small businesses fast, simple and fair loans. The startup looks to help fill the $2.4 trillion credit gap in the SME lending market by giving small businesses a better risk adjusted rate of return.

This is the first round of funding for Bigstone and is reflective of the growing alternative finance sector in Australia. The startup is on track to expand its local growth strategy as more businesses seek out flexible, fast and affordable financing options.

According to Bigstone, 83 percent of SMEs find it difficult to obtain credit and interest rates with better returns, with this stat seeing Australia now ranked as the third largest market for online alternative finance in Asia Pacific, sitting just behind China and Japan. This sector in Australia is valued at close to $460 million.

Sandy Beard, CEO of CVC Limited said that she sees huge potential for Bigstone.

“CVC makes long term patient capital investments, and there is a significant opportunity for Bigstone to take advantage of a market that is being disrupted by marketplace lenders and rapidly grow their business,” she said.

“We believe Bigstone has created a better intermediation process than those currently available that vastly improves the process for enabling investors to provide loans to borrowers while providing them with vastly improved investment returns.”

Bigstone was created by financial heavyweights including Boyd Pederson, former partner at Boston Consulting Group; Robert Morgan, who has led IT development for Commbank and Westpac; Marcus Korff, former divisional risk head for ANZ; Liam McLagan, who has worked for financial services companies in Australia and the UK; and Inderjit Singh, who has worked at Westpac, Deloitte, and TeleTech.

With over 100 years combined experience in financial services, the Bigstone team have taken lending recipes used by banks and added new sources of data and proprietary algorithms to deliver competitive small business lending rates for credit-worthy small businesses.

“Having worked in senior finance roles, we saw firsthand how hard it is for small business to get funding. Owners can spend months waiting for a response only to be told that they can only get a loan with increased fees, more paperwork and more collateral. The current system doesn’t work, and after years of listening to small business concerns, we chose to create a solution,” said Pederson.

“We want to return lending to its roots by creating a community where investors come together to fund the best opportunities while also earning a great return. There is so much information available that banks simply aren’t using – Bigstone uses this data to create an honest credit assessment. We then reward borrowers for transparency; so the more information you share, the better your rate will be.”

In looking at the first round of investment Pederson said that it was important for the startup to find the right long-term capital investors whose vision for the marketplace lending and capabilities aligned with theirs. Investors like CVC and the founders of Lighthouse Venture Partners have proven they can support Bigstone’s longer term growth plans with value-add beyond funding.

“Partnering with the right investors who understand our company, philosophy and vision, who also have an established track record of working with high growth companies and understand both equity and debt investing is extremely important to us. Each investor bring a combination of skills, capability and connections that will accelerate our growth and help us on the road to become the market lender of choice for small business loans.”

The delivery of non-traditional financing services is having a strong impact on small businesses, and the fact that there is strong demand in China and Japan is another boost to Australian fintechs, who are increasingly looking to Asia. Earlier this month Sydney’s fintech coworking community Stone and Chalk launched its Fintech Asia incubation exchange program to spur collaboration between Asia and Australia by creating a “fintech super-highway.”

“This isn’t a country versus country play. We are helping governments, regulators and key organisations across Asia to adopt best practice,” said Alex Scandurra, CEO of Stone and Chalk.

“We want to ensure that as a region we are able to create new wealth and employment opportunities by helping to foster the industries of tomorrow, particularly as fintech is uniquely positioned to support every sector of every economy,” he added.

Within the same week Sydney coworking space Fishburners also announced it will be expanding connections between Australian and Chinese startups. CEO of Fishburners, Murray Hurps announced a new space will be offered in Shanghai for Australian startups to enter the Chinese market.

The new space will help facilitate a two-way knowledge exchange to support Australia’s fintech’s entering the Chinese market and also help Chinese entrepreneurs engage with these startups.

Hurps said, “We support entrepreneurs aiming for large markets, and while Australia’s an amazing place to launch a startup, the large addressable markets are almost always overseas.”

Image: Bigstone Team. Source: Supplied.