Prospa IPO could be back on as amended loan terms get ASIC green light

Online lender Prospa’s stalled IPO could be back on track after it adjusted its loan terms in response to an ASIC review.

Prospa founders Greg Mosha and Beau Bertoli. Picture: Supplied

Online lender Prospa has finally managed to placate the concerns of the corporate regulator in relation to its loan terms, potentially paving the way for the fintech to revisit its stalled IPO.

Prospa shelved its highly anticipated $146 million float at the last minute in June, citing the need to respond to queries posed by the Australian Securities and Investments Commission (ASIC).

However, the postponement of the float was shrouded in confusion, with the corporate regulator, saying that it had not raised any specific red flags pertaining to Prospa’s prospectus.

Having postponed the IPO indefinitely, Prospa on Friday said that its loan terms had now been completely reviewed by ASIC and that the company has agreed to adjust some of its contract terms.

“Prospa notes that the amendments agreed with ASIC do not have any material impact on the company financially or operationally,” the company said.

“Some of these terms have, historically, not been relied upon, and other terms were amended to clarify or reflect existing policies.”

The company, backed by Square Peg Capital, Entree Capital and AirTree Venture Capital, declined to confirm whether its planned float was back on the table.

Prospa, which has been the market leader in the SMB lending space, has consistently come under scrutiny for its high interest rates and its reliance on the brokers.

With an average annual percentage interest rate (APR) of 41 per cent and rates ranging from 8.5 per cent to 29.9 per cent, almost 40 per cent of Prospa’s loan book is made up of businesses less than three years old.

The fintech’s general counsel Nicole Johnschwager said that it has been working with ASIC and customers to deliver more transparency.

“This is an evolving area of regulation and we will work with industry peers and stakeholders to support this important and growing industry,” she said.

“We call on other small business lenders in the industry to engage with ASIC and complete their own reviews and to subscribe to the Code of Lending Practice if they haven’t already.”

Prospa is also one of the six online lenders to have committed to comply with the Online Small Business Lenders Code of Practice, developed jointly by the Australian Finance Industry Association (AFIA), the Australian Small Business and Family Enterprise Ombudsman (the Ombudsman), SMB advocate, theBankDoctor.org and FinTech Australia.

Apart from meeting all of the current legal and regulatory requirements the six lenders have also agreed to provide an additional layer of transparency through the introduction of a pricing comparison tool.

The comparison service will give borrowers all of the key metrics, including total repayment amount, annual interest rate and annual percentage rates, allowing them to compare the cost of unsecured loans.

Prospa, which has over 12,000 customers, has to date originated over $500m in loans, with 69 per cent of customers happy to do repeat business with the lender.