Lifeline for start-ups as Mitchell Asset Management acquires Fundsquire loan books

A Melbourne-based financial services firm says it is ‘stepping into the breach’ left by the collapse of start-up lender Fundsquire, which laid off its staff.

Mitchell Asset Management managing director John Mitchell.

Start-ups relying on Fundsquire have been thrown a lifeline, with Melbourne-based Mitchell Asset Management acquiring the failed local lender’s Australian and Canadian loan books totalling $50m.

As The Australian reported on Thursday, Fundsquire stood down dozens of staff and abruptly ended some of its loan arrangements earlier this month, causing small businesses and start-ups across Australia, Canada and the UK to scramble to find alternative funding arrangements.

Fundsquire, which has more than 50 employees globally and around two dozen in Australia, provided loans to start-ups and SMEs through early access to their R&D tax credit payments.

Led by former Merrill Lynch and Macquarie executive John Mitchell, Mitchell Asset Management has its headquarters in Melbourne. Like Fundsquire, it offers short-to-medium term loans secured against the government’s R&D tax incentive program.

“We’re stabilising things. Fundsquire was a large part of the ecosystem and [its collapse] obviously has ramifications, but we’ve stepped into the breach,” Mr Mitchell said. “We’re well experienced, we’re a good, safe pair of hands, and we’re open for business. We’re here to take their calls and nothing need change other than the person that you speak to on the end of the phone.

“We’re local, we’re wholly owned by our staff, and we don’t rely on any offshore finance funding. Our cheque book is open and we’re committed to the borrowers to be a safe pair of hands to see them through.”

Mitchell Asset Management has invested to date in companies including o4D Medical, Anteris, Hazer Group, Nano Digital Home Loans and Utopia Music.

Fundsquire’s UK loan books are understood to have been acquired by London-based online lending platform Sprk Capital.

As first reported by The Australian, earlier this month Fundsquire, founded by Damien Petty in 2016, sent an email to start-ups that it would not be proceeding with any loans, placing some of the borrower companies’ survival in jeopardy. The alternative lender had raised $75m from investment firm Fasanara Capital last year to deploy across Australia’s start-up sector.

Fundsquire founder and CEO Damien Petty.

“To whom it may concern, Fundsquire is unable to proceed with all loan applications this year,” the email sent to affected companies reads.

“Unfortunately, all staff were stood down as of the 1st of December. We apologise for the inconvenience this may cause.”

Mr Petty declined to respond to detailed questions sent by The Australian and refused multiple requests for comment. Fundsquire announced in September that it had lent more than $110m in funding to start-ups and small businesses globally.

One start-up chief executive, who requested anonymity, said their company was in the process of finalising a new loan with Fundsquire before being told all of its two dozen local staff had been stood down earlier in the month.

Fundsquire’s closure would likely cause pain throughout the local tech sector, which is already grappling with financial difficulties, they added.

“I am concerned that there is likely to be a number of companies who were relying on Fundsquire R&D lending before the end of the year,” the executive said.

“It could spell contagion in the ecosystem as who knows who was waiting on funding, and who has current loans and if their insolvency could trigger early repayments.”