Ivan Pellegrini is co-founder & Group CEO at Borsadelcredito.it.
What is BorsadelCredito.it about?
BorsadelCredito.it is the first Italian p2p lending platform. We help creditworthy SMEs to obtain credit in just three working days while promising 5-7% return to our investors. So far, we disbursed loans for 4.3M EUR (as reported on our statistics page) boosting the savings of hundreds of lenders.
In a market context where about five million SME’s are facing strong difficulties in approaching traditional credit channels, P2P lending represents a breath of fresh air for both investors and entrepreneurs.
What are the three main advantages for investors?
For investors, accessing a digital marketplace represents an unprecedented way to obtain strong returns while supporting Italian SME’s. Overall, expected average returns range from 5 to 7% and, thanks to a strong diversification level (funds are divided among hundreds of firms) the risk of losses arising from defaults is strongly contained.
With BorsadelCredito.it our lenders invest in the Real Economy. The digital marketplace is the most efficient and attractive way for credit operations in the Italian enterprise framework: loan fund and SMEs financing opportunities represent one of the easiest investment options in the whole market.
What are the three main advantages for borrowers?
For the applying companies, forwarding a request is very easy: as for the lender, the experience is completely digital and way faster than the traditional credit channels. From BorsadelCredito.it it takes only 5 minutes to complete a loan request: in order to be evaluated, firms must have at least one year of activity, 50.000 EUR stream of gross revenue and no sign of adverse events from Credit Bureaus.
Funding requests are handled by our neuronal algorithms in a few hours and then forwarded to an experienced team of credit analysts, who overlook the firm’s statements and overall performance in 24 hours to send a final response: if the evaluation is positive, credit can be disbursed in just two working days, without the need to open a bank account or provide any guarantees.
What ROI can investors expect?
The ROI our investors can expect is very high and it’s around 5/7%.
Currently the average is 5.71% after bad debts and fees, much higher than what they would earn with the other traditional tools for investments. Last but not least we have a credit protection for our investors payed directly by borrowers.
Is the technical platform self-developed?
Yes, the platform is completely self-developed, as for our valuation models. We invest most of our resources (both in terms of time and money) in the development of efficient processes, workflows and credit scoring models (for example, we are now building a more complex Web-scoring model, which uses big data from the internet to give us a clear overview on how the web sees the evaluated company).
What was the greatest challenge so far in the course of operating Borsadelcredito.it?
The biggest challenge is to convince Italian Institutional Investors to start investing in alternative finance. Real economy, in Italy, is still almost fully served by traditional banks and alternative investors are just starting to watch in. Time, education and track record are crucial to boost this market.
By the way, after one year of activity, we harvested about 5 million EUR just from retail investors, which gave us the opportunity to fund about 200 companies in the whole country, fostering growth and productivity. People see us now as a more reliable reality with this data on our side.
Can you please highlight some aspects in which the Italian p2p lending market differs from the UK market?
At first, the figures of our “newborn” p2p lending market are not as encouraging as the UK one. First, because of a matter of time. UK p2p platforms are way more established in the market contest, if compared to ours: Funding Circle, for example, opened in August 2010, whereas BorsadelCredito.it has just blown its first candle (even thought our numbers seem to increase month after month, denoting a steady growth rate). Secondly, it is also a matter of mentality and financial literacy, that heavily differs the Italian and UK markets. Italian investors find hard to trust financial authorities different from banks, both in terms of investment and funding matters: for this reason, we aim at making our product become “viral” both for lenders and borrowers. Last but not least, the regulatory framework for alternative lenders is not so friendly. To direct lend to Italian companies, a credit licence is required. Therefore, any professional investor, to invest in our asset class, needs or to set up an Italian Law Credit Fund or to invest by acquiring some quotes of our “captive” Credit Fund.
Please describe the regulation in the Italian market. Does that pose a substantial barrier to fintech startups?
At first, Inland Revenue policy represents a strong disincentive to those willing to invest in the real economy through p2p platforms: in fact, apart from a 26% withholding tax, lenders are obliged to put the interests in the tax statement (therefore, subject to an additional marginal income tax depending on the subject – which can potentially pay a total amount of 46% in taxes on the matured interests). This fiscal treatment differs a lot from the other traditional asset classes: for example, treasury bonds are subject to a 20% withhold, while stocks and other similar assets are taxed 26%. However, we never lack of creativity, as we always find great promotions that convince our investors to increase the capital amount invested in out platform!. Finally, marketplace lending platforms are also fully regulated by the Italian Central Bank and it is expensive and time consuming to obtain a licence.
Which marketing channels do you use to attract investors and borrowers?
Marketing is crucial for Borsadelcredito.it. Our aim is to raise awareness about peer to peer [lending] for companies and Italian investors. Nowadays we are using radio and digital tools mainly. We’ve also developed a network of partners, consultants and others professionals who are supporting us in enlarging our clients portfolio.
Currently the site is in Italian. Are there any plans to offer an english language interface and open for international retail investors?
Currently our website is exclusively in Italian: basically, the companies we are financing are small/medium size and the investors need to have an italian VAT number (other unique and paramount constrains of our Inland Revenue!!!).
Our plans are to implement the website with other languages in order to make our service available for other countries.
What developments do you plan for the next 6 months?
Monthly the origination is growing up to 30%. This year we reached great goals as a peer to peer platform, in a country where banks win most of the times.
Every month, every day we set up new goals always more challenging.
Where do you see Borsadelcredito.it in 3 years?
In the next three years we aim to be a point of reference both for the SME’s who need credit support, as well as for the ones who wants to invest in a secure and innovative asset class. On the other hand we keep in mind that one of our biggest goal is to reach institutionals investors in order to make our market.