After raising €5 million in an equity sale to fund its future, Latvian-based Creamfinance has announced that it is selling €2.5 million in bonds to help it grow its lending portfolio. A digital lender, Creamfinance has been carving out a niche, providing personal loans in regions underserved by larger marketplace lending firms. Operating with country specific brands and websites, the lender currently serves Poland, Latvia, the Czech Republic, Slovakia and Georgia, with further expansion to South America and the Caucasus planned. Average loan sizes are for €210 with an average duration of 28 days, with total loans approaching €5 million since the company’s launch in 2012.
At the heart of their operation is what Creamfinance calls ‘smart data’. Regarding this model, Viktorija Gorcakovaite, PR Specialist at Creamfinance, said to Finance Magnates that many lenders are turning to big data to assist them in analyzing borrowers, with some firms claiming to review up to 10,000 data points to analyze potential loans. Gorcakovaite explained that at Creamfinance, the firm is using an opposite approach of focusing on traditional financial metrics such as a borrowers income and monthly expenses. She added that this provides a simplified approach to collecting data, with them using a “specific formula that has flexibility”.
It is much less of a burden for the customer at registration to provide less information
According the Gorcakovaite, there are several benefits to their smart data approach. Among them include a simplified form for collecting data from borrowers of which Gorcakovaite explained that it makes it “easier for customers to apply with a fast loan decision that can have money transferred to their bank accounts as quickly as in 15 minutes”.
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With regard to the simplified data collection process, Patrick Koeck, Chief Risk Officer at Creamfinance explained that there is a lot of debate about the benefits of big data versus smart or small data. He explained though that “it is proven that models with lower number of variables result in higher stability.” Koeck added that “it is much less of a burden for the customer at registration to provide less information, which initially yields a much higher conversion rate.”
Equity vs Bonds
In contrast to their previous €5 million in funding from private venture firm Flint Capital, Creamfinance is currently tapping the public markets to raise capital through bonds. Gorcakovaite explained the difference in that the debt financing is being put down to “fund the growth of our portfolios, whereas equity financing is raised for expansion into new markets and new product development.”
As part of that expansion, Creamfinance has recently formed a partnership with crowdfunding firm Mintos, to market their lending services to Georgia. Looking ahead, Gorcakovaite stated that the firm will continue to seek such relationships which they believe are natural partners for their offering. Interestingly though, even as many marketplace lenders have been forming deals with banks to provide services to their customers that don’t meet their loan requirements, Creamfinance has no plans to partner with banks.