Blog | RateSetter

Announcing new direct lending partnerships

By Luke OMahony

Our goal has always been to deliver excellent risk-adjusted returns to investors and attractive finance to borrowers.

To date, we have provided finance directly to borrowers, with the addition of some wholesale lending to specialist intermediaries who lent the funds onwards to their customers (our recent blog on this can be read here). Today, as part of our strategy of building closer, direct relationships with borrowers, we have announced that we are ending wholesale lending originations, and entering into new relationships with some of our previous wholesale finance partners.

We have established a strategic partnership with George Banco, a guarantor lending platform that plays an important role in increasing financial inclusion. Under the previous wholesale arrangement, there is £32.0m outstanding which will now continue to be repaid in accordance with the schedule of the existing loan contracts. Loans will be delivered directly to George Banco’s growing customer base, which currently stands at around 10,000 people, with George Banco acting as introducer. Additionally, Peter Behrens, Chief Operating Officer and co-founder at RateSetter, now sits on the board of George Banco as a director and RateSetter has taken an equity stake in the company.

We have also acquired specialist motor finance providers Vehicle Stocking Limited (which provides stocking loans to car dealers) and Vehicle Credit Limited (which provides loans to car buyers) out of their parent company's administration. Under the previous wholesale arrangement, there is £37.8m outstanding which will now be repaid according to their original schedule. We will rebrand both businesses and invest in them to build on our existing direct motor finance capabilities. We believe the acquisition of these partners reduces the risk of this exposure.

The new relationships with George Banco, Vehicle Stocking Limited and Vehicle Credit Limited expand our direct finance distribution network and mean that all loans will be delivered directly to the end borrower. They also, we believe, reduce the risk of the current wholesale exposures. Going forward, we anticipate that lending through these channels will be around 5-10 per cent of our monthly loan volumes.

This move from wholesale arrangements to direct lending to the end borrower has of course resulted in a change to our lending criteria and we have updated our types of lending document accordingly, which you can see here.

We updated this post on 9 May 2017 to specify the amount of lending outstanding to George Banco, Vehicle Stocking Limited and Vehicle Credit Limited and to add that we believe that these changes reduce the exposure risk. We have also included a link to our updated lending criteria.