Prospa lending hit hard by coronavirus outbreak

Online small business lender Prospa says new loans slowed to just 10 per cent of pre-COVID levels.

Joint Propsa CEOs Greg Moshal and Beau Bertoli. Picture: John Feder.

Online small business lender Prospa has been hammered by the coronavirus pandemic that kept Australia in lockdown as new loans slowed to just 10 per cent of pre-COVID levels.

Only $8.7m was lent in April and May, well down on the $122.8m in new loans in the March quarter.

Gross loans in the third quarter of 2020 were $465m, up 41.7 per cent on the previous corresponding period.

Prospa’s share price closed 3.9 per cent up on Wednesday to $1.31, but still well down on its $5.09 high in September 2019.

In its update to the market on Wednesday the lender said the coronavirus pandemic had had a material impact on its business, adding it would not issue any originations or revenue guidance for FY20.

It said it had slashed operating expenses by 32 per cent by cutting its workforce, reducing work expenses, significantly scaling back marketing expenses and renegotiating contracts with suppliers.

Prospa CEO Greg Moshal took a 50 pay cut, while the management team accepted 20 per cent pay cuts and 40 roles across the business were made redundant. In recognition of the economic conditions, Prospa gave 5501 customers full or part reductions on loan repayments, with the interest to be capitalised.

Prospa also fully deferred repayments for 12.8 per cent of its customers for six weeks as part of COVID relief measures, while 19.9 per were given 50 per cent deferrals for 12 weeks.

Customers, on average, repay loans to Prospa in 14.6 months.

Some businesses have returned to paying, with 18.6 per cent of those given deferrals reverting to full payments.

Tourism-dependent businesses, cafes, beauticians, gyms, pubs, restaurants and clothing retailers make up the majority of customers who have had loans deferred.

Mr Moshal said he was encouraged by the green shoots emerging in the broader economy but the business needed to “focus on preserving our capital” so they were well-placed to respond to the post-lockdown bounce-back.

“As our third quarter results demonstrate, Prospa was in a strong position going into COVID-19, which allowed us to react quickly and adapt to the new operating environment,” he said. Mr Moshal said Prospa was closely monitoring market conditions for signs of recovery.