Personal finance lender Salt & Lime was ‘likely insolvent’ with $50m in debt

While a Sydney finance company ran at a loss, the directors were paid bonuses, and they and their spouses were drawing more than $1.3m in salaries. Meanwhile there is a $50m debt hole.

Salt and Lime director Will Kiln pictured in promotional material for the company’s crowd funding capital raise.

Salt & Lime, a personal loan funder backed by iPartners, may have been using investor funds earmarked for loans to run operations and was probably trading insolvent with $50m owed to creditors, its administrators say.

And while the Sydney-based company ran at a loss for the past three financial years, the directors were paid bonuses, and they and their spouses were drawing more than $1.3m in salaries, the report prepared by PwC says.

Receivers were appointed to the Sydney-based personal loans company on June 11 and administrators PwC appointed on the 17th, after iPartners discovered that funds which were meant to be repaid to it might have been used for operations. Salt & Lime was set up as two entities, Salt & Lime (SL) and Salt and Lime Funding (SLF), with SL the operating company and SLF holding funds to be lent to customers.

But the administrators report published by PwC recently says it appears that the loan funds may have been used for operations.

“It was brought to iPartners’ attention that various intercompany loans had been advanced from SLF to SL, which potentially included capital funds which were to be retained by SLF for repayment of iPartners debts,’’ the report says.

Once this became apparent, receivers were appointed.

Salt and Lime co-founder Will Kiln.

Salt & Lime was run by directors Will Kiln and Morris Grenfell.

It attempted to raise $3m through an equity crowd-funding campaign in mid-2022, with the company saying at the time it was targeting an initial public offer in December 2023.

It said it was growing at about 23 per cent per month and had secured $32m from iPartners, “supporting annualised revenue of $13m by December 2022’’.

The Salt & Lime model involved extending personal, car and debt consolidation loans to customers, and offering interest rate discounts if they completed financial literacy education modules.

While the capital raising appears to have missed its minimum target, there appear to be shareholders on the register who came in through that platform.

While the company was targeting strong growth, the administrators report claims SL may have traded insolvent from June 30, 2023 and SLF from June 11, 2024.

“The companies continuously made losses over the period 30 June 2022 to the date of our appointment,’’ the report says.

“SL was solely reliant on funding from SLF to service the loan book and there was no formal agreement in place for these services.

“SL maintained a net working capital and net asset deficiency, as well as a current ratio below 1 for FY22, FY23 and YTD24.

“Our review indicates this was due to its large payroll liabilities and intercompany loan from SLF.

“Whilst SLF had a working capital surplus throughout this period, it suffered from a consistent net asset deficiency due to the amount owed to iPartners outweighing the balance of the loan book as recorded in the management accounts.’’ The Australian has been unable to contact either of the directors of the company and the phones are not being answered at the business.

The report also says the directors advised them they were using SLF funds for SL operational costs “which was not in accordance with the facility agreements’’.

PwC said when they were appointed, SL had about 2200 customers on its books and debts of about $8.1m, $7.3m of which was owed to SLF, while SLF had debts of $42.6m, virtually all owed to ­iPartners.

PWC’s report says that while the company experienced substantial growth, both companies continued to run at a loss and a service agreement between the two entities was never entered into.

Salt and Lime's projected loan book increases in data from an investor pitch.

“As such, SL had limited visibility on its forecast service fee revenue and the ability of this revenue to fund/meet operating costs,’’ the report says.

The company lost $745,000 in FY22, $2.3m in FY 23 and $4.1m in the most recent financial year until receivers were appointed.

While iPartners has security over the customer loan book, “Based on their initial investigations, the receivers and managers have advised that a significant portion of the customer loans are in arrears/non-payment and as such, may not be fully recoverable’’.

PwC said it did not appear that the companies were preparing short-term cashflow reports to gain visibility of their financial flows and “do not appear to have maintained their obligations to maintain financial records in accordance with the standard prescribed’’. It also appears, PwC says, that the directors paid themselves each $225,000 in bonuses, but structured them as loans.

“It is unclear why the payments were structured in this way, and there is no supporting documentation related to the transactions,’’ the report says.

The directors were each being paid $388,500 per year and their spouses were paid $277,500 each.

Natalie Grenfell and Mandisa Kiln were also directors of the business in the past, with Ms Grenfell a director from June 2018 until April 2023, while Ms Kiln was a director for slightly more than two months ending in February 2023.

The report says the receivers are exploring options to transition the servicing of the outstanding loan book to an external third party.

“We understand parties have been identified and transition planning is currently under way,’’ the report says.

PwC has recommended to creditors that the companies be liquidated and estimates that in the event of a liquidation the unsecured creditors of both entities will receive nothing. However the lion’s share of the debt is the money owed to iPartners, which is secured

iPartners increased the amount it had made available to SL in May up to $100m, with iPartners co-founder cofounder and chief executive Travis Miller saying at the time that the company “exemplifies the essence of social responsibility in the lending domain, affirming the critical importance of financial education in achieving holistic wellbeing’’.

iPartners told The Australian it “is actively collaborating with the appointed receiver and administrator to gather critical information and fully understand the circumstances surrounding the recent developments with Salt Lime’’.

“This process is essential to uncover all pertinent details and ensure a thorough understanding of the situation.

“Until this investigation is complete, we are unable to provide definitive answers to all questions. Our primary focus, in the meantime, is on maximising the recovery of our investors’ funds.’’