SME Lending & Small Business Financing : Bitbond


Hi and welcome everyone I’m Radko Albrecht I’m the founder and CEO of Bitbond so what is Bitbond? Bitbond is the first-ever global SME lending platform as you all may know being part
of this conference SMEs have a really hard time to get the funding they need
to grow their business and this is not just true for the world where we live in
and Western Europe but this is true for most markets around the globe and the
World Bank actually estimates the funding gap of SMEs around about two
trillion dollars and so we find this to be a great market opportunity and
therefore we created a platform where we can reach every SME just through one
platform through Bitbond and the SMEs can get working capital financing
through us the way we have done it is we’re using blockchain technology for
payment processing because one of the challenges that you have when you want
to provide global SME lending is how to get the payment sufficiently from A to B
and so we’ve started from day one to use blockchain for payment processing in
order to replace the Swift system in the background and also we are a
regulated financial institution so we don’t need a fronting bank that would do
the payments for us but we have the whole process in-house and on our own
developed platform and this also makes us one of the first blockchain companies
at all to have a BaFin license we got a license back in 2016 so the loan that we
provide are working capital loans they go up to $50,000 and they are mostly
used by retailers by restaurants by taxi drivers freelancers and other small
business owners to fund the growth of their business as I mentioned we power
the payments to blockchain however the customers don’t really notice that
because typically they just want to have the loan paid out to their bank account
or to their mobile money account and so what would happen for example let’s
assume we have an investor here in the UK who funds a loan in Kenya then this
payment would first of all start with a regular bank account transaction however
here in Europe where we would convert the payment into a crypto token that then gets paid out again locally and to the
Kenyan borrower and in the background a conventional payment would run through
the Swift system and we replace that in order to make that payment faster and to
make it cheaper on average we save round about 200 basis points per transaction
with this setup and so the customer only perceives that everything is faster
and cheaper but they don’t really need to understand the underlying technology
one other thing that our customers really love about our solution is the
speed by which we can make credit decisions we can be as quick
as 30 minutes typically we will approve an applicant within 24 hours one of the
reasons for that is that we use only digital data sources and primarily Bank
account transactions so we categorize bank account transactions and based on
that we calculate KPIs like monthly revenue liquidity operating margins also
potential red flags that we may see in the account and so based on that we make
decisions very quickly and that’s one of the things that also differentiates us
potentially from other platforms and also from banks if they are available
where our customers are located now since the product is very well
appreciated by the borrower’s how does it look like from the investor side why
would a platform like Bitbond be attractive for a debt investor? and in
our perspective there are three main aspects that are very important here the
first aspect is that we have created a very scalable origination channel we are
generating most of the loan volume through partnerships and a lot of the
partners that we work with today are international platforms themselves who
wants to monetize the existing customer base in a better way so to give you one
example an e-commerce marketplace that has a smaller steady-state gross
merchandise volume on its platform would want to increase their revenue per
customer and one way to do that is to offer work in capital loans to the
seller on the platform similar for example to
food delivery platforms where they may want to increase the revenue they
make per restaurant one way to do that is to offer financing but of course to
offer financing is not trivial you need to have the regulatory setup you need to
have to credit know-how and so one obvious thing to do is to partner with a
platform like Bitbond and the cool thing is here that many of these
platforms that we work together are International themselves and they don’t
want to get a new lending partner in each of the 10 or 15 countries where
they are active and so since Bitbond is an international platform they take
advantage of that fact and that’s one of the reasons why in many cases they
decide to work with us instead of with other platforms because we can go to all
the markets with them where they are active themselves and so this lets us
access a huge addressable market of around about 45 million SMEs around the
world and therefore we can scale this business model in a very nice way the
second aspect that is very important and and relevant for debt investors on
our platform is the diversification and diversification from many different
standpoints first of all the geographical scope invested in our
platform can decide into which countries into which regions they want to get
exposure to and where they want to invest this is important because if you
just invest into one country for example then you effectively have a relatively
strong exposure to that economy of this country if you invest into consumer
loans in the UK only then you will be exposed to the economic cycle because
obviously default rates tend to go up in a recession and tend to be low when the
economy is doing well and on Bitbond you can diversify away part of that
country risk simply by building a globally diversified portfolio of loans
the other aspect is the sectors as I mentioned retailers restaurants
freelancers and other SMEs and by investing into different sectors there’s
also a important diversification aspect and then a third part being the risk
where obviously you can decide between a distribution of lower risk in the higher
risk SMEs that you want to invest in and
this is a level of diversification that in our view is not really possible in
the same fashion on many other platforms and the third aspect that’s obviously
important to investors as the returns the average nominal interest rate on our
platforms run about 25 percent these are installment loans was a
relatively short duration the average term length is 11 months so these are
relatively short cash cycles and we target and we aim for an effective
return after bad debt of around about 10% in this set up and so far we’ve lent
about 15 million dollars and in total loan origination right now we do run
about 1 million per month and with the partnerships that we have we can easily
scale that up to 5 to 10 times this amount now if you decide to invest and
if you find this attractive we offer you 3 ways how to do that the first one is
the plain vanilla investment into the loans on our platform
so you just register as an investor we have a tool that’s called Autoinvest
where you specify your investment criteria and by that you can
automatically build a loan book according to your investment criteria so
that’s the most straightforward way then one other way is to build a bit of a
different risk and return profile through a junior and a senior note so a
securitization where you can either finance the first loss piece which has a
higher potential return or you can finance a senior piece which has a fixed
coupon but which is collateralized by the junior piece or a third way to
invest into the loans of SMEs is through a bond and Q1 2019 we plan to issue a
bond with a proper security prospectus and the innovative thing about the bond
that we’re about to issue is that it is a tokenized bond so it will not be
traded through conventional exchanges but since it’s a crypto token it can be
listed on any crypto currency exchange and that means that this is a very
liquid investment and you have a secondary market here from day one
so that is Bitbond we hope you find this an attractive way to get access and
exposure to SME finance should you have any question
I’m here today with our CFO with Michael Pinkus we may not look as good as this
lady here on the presentation but we will be just as kind and looking forward to
speak with you and and work with you in the future thank you!

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