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In March this year, Di reported that the fast-growing Swedish credit company Lend, which was founded in 2014, planned to raise more than SEK 700 million in a new share issue.
The company’s business concept is to challenge the major banks and offer unsecured loans, that is, unsecured loans, to Swedish individuals with a relatively high credit rating. In total, Lendify’s loan portfolio is worth SEK 2.5 billion.
But Lendify recently suffered a severe setback when the company was denied permission from Finansinspektionen to carry out so-called financing operations, by becoming a credit market company, which, for example, had given the company the right to start offering savings accounts to your clients.
With reference to the sources, Di can now reveal that the work of the capital round, which was internally called “Project Vega” and which was led by investment banks Nordea and Jefferies, stuck.
Lendify CEO Nicholas Sundén-Cullberg now confirms that the company actively worked in June to attract new capital to the company.
“The idea was to capitalize before they granted us as a company in the credit market. But then unfortunately came the rejection from the Swedish Financial Supervisory Authority, which meant that we were unable to close that process over the summer, ”he says.
According to documents aimed at potential investors, which Di has read, Lendify hoped that private deposits would become a very important source of capital for the company. The idea was that savings accounts would fund 51 percent of new loans and 27.5 percent of the company’s total loans by the end of 2021.
“In the short term, this doesn’t change anything. Our business model already works today and we are growing very fast. At the same time, you always want to improve and develop. Being able to offer savings accounts with a deposit guarantee would have been great, but very often you have to fail once or twice before being successful, ”says Nicholas Sundén-Cullberg.
Lendify can now be confident of continuing to finance its credit operations by borrowing institutional capital, confirms the CEO. The company’s original business concept was to offer “peer-to-peer loans,” that is, loan intermediation directly between individuals, but today this is only a small part of the business.
But an insider tells Di that interest, even before FI’s rejection, was lower than expected among potential investors in the market. However, the CEO denies it.
“The interest was very great, especially from foreign accounts,” says Nicholas Sundén-Cullberg.
He also disagrees with the description that work on the equity round has been interrupted or failed.
“In the basic plan, we would not have access to capital until the end of the second quarter of 2021. Therefore, we have not yet failed with that time frame, although it will probably be a little ahead in time.”
When Finansinspektionen rejected Lendify’s application, the main criticisms revolved around the company having too small a capital base – that is, too few funds in its own coffers – and recently showing negative equity at the group level as well.
Nicholas Sundén-Cullberg says the company will reapply for the permit when it has increased the capital base, but it is unclear when it will be able to be submitted to the authority in time.
“After FI’s rejection, we had to formulate a plan on how to proceed. Now we have stopped thinking and have decided the way forward. We will tell our investors about our plan, so that ‘Project Vega’ is alive and well. “
Part of the reason is that Lendify is nowhere near profitable. It wasn’t until 2022 that the company was expected to be able to turn a profit, according to internal documents that Di was informed of. Last year, the company posted a loss of SEK 163 million on sales of SEK 130 million.
In the spring, Lendify raised SEK 148 million in new capital for its company, but only existing owners participated in what can be considered as bridge financing. The valuation increased on that transaction by 37 percent to SEK 1.65 billion.
Previously, the idea was that Lendify would be listed on the stock exchange in 2021, after the large equity round had been completed, according to internal documents reported to Di. What is happening now with the listing plans is uncertain.
In parallel, it has also been observed that Lendify raised a loan of SEK 150 million in mid-2018, through a listed bond where its own technological platform is used as collateral. The loan will be repaid in May 2021 and has a current interest rate of about 14 percent.
For many companies, the technology platform is the most sacred. How did you weigh the risks when you chose to use it for security?
“We wanted to avoid dilution among owners, but continue to grow and raise new capital only when we have reached a higher valuation. We are confident that we can handle the payments that bondholders demand, so we never risk our technology platform, ”says Nicholas Sundén-Cullberg.
