GLI Finance invests in a second crowd-funding platform
The company has taken a 20% stake in a platform that provides invoice funding for businesses and follows a recent investment in a crowd-funding lending platform.
The £2 million investment in Platform Black, which provides a type of invoice finance that has traditionally been provided by factoring companies, marks another step in the transformation of the company by Chief Executive Geoff Miller. Under Miller, GLI Finance (LON:GLIF) a specialist lender to small and medium sized businesses, has evolved from an investment trust or company structure to something more similar to a holding company for lending businesses.
The new investment in Platform Black Limited, provides GLIF with a 20% stake in the business, with Geoff Miller joining the Platform Black Board.
GLIF describe Platform Black as the fastest growing online platform for crowd-funding invoice finance. The platform enables SMEs to get access to the money tied up in their invoices by auctioning them online to investors seeking attractive short-term returns.
Platform Black delivers cashflow on demand on a pay as you go basis. SMEs auction their invoices, remaining in control of all of the costs to investors who compete to deliver the lowest cost of finance. Platform Black has advanced around £21 million to SMEs to date, and delivered net annualised returns of 12-15% to investors.
Platform Black launched in June last year and grew monthly financing from £65k to over £4m by last month. It earns a fee of 10% of investors gains and additionally imposes transaction fees that range from 0.50%-0.90%, dependent on the length of the loan. The default rate is low at 0.18%.
Commenting on the announcement Geoff Miller said: “This investment is a perfect fit within our strategy of focusing on niche lending to SMEs and enables us to add short-term asset-based debt to our portfolio, while continuing to reinforce the geographical diversification of our business. We are delighted that Colin Levins, Louise Beaumont and their team have chosen to partner with us, and GLIF looks forward to building on this investment by trading on the platform, as well as investing in the business.”
Colin Levins and Louise Beaumont, co-founders of Platform Black, commented: “We are excited to have GLI Finance as a significant investor and partner in our business. In 2012, in the UK alone, the invoice finance market was worth £254bn. This, together with a gap in SME funding estimated to be between £84bn and £191bn by 2018, means that there is significant and growing demand for our services. There are excellent synergies between GLIF’s other platforms and our business and we look forward to working with Geoff and his wider team.”
Crowd-sourced finance is a growing business still in its infancy. Although it would probably have developed had there been no banking crisis, the fact that there has been one and that we’re still living with its aftermath of reduced levels of funding, has certainly created a huge market for this type of funding. Additionally, low bank interest rates means there is an increasing pool of investors seeking a higher level of return.
This investment is one of a series of initiatives Geoff Miller has initiated since taking control of the company when its market capitalisation was down to only £1.5 million. He has successfully reorientated it from being a US only finance business to one where it has a large and growing UK business with a presence in fast developing areas.
Investors should be reassured that the risk profile for GLIF’s businesses is much less risky than that of a bank because its loans are secured against physical assets and are made a very diverse range of borrowers across a range of industries. Additionally GLIF has a high yield of over 9%, which is fully funded from earnings.
As a former analyst himself Geoff Miller appreciates the importance of aligning the financial interest of senior staff, including himself and that of the bosses of the companies he has been acquiring with shareholder interests, tying remuneration to long-term financial performance, and requiring managers to invest their own money in their businesses.
We continue to see the potential for considerable upswing in this business and it remains on our Buy list, with particular appeal to the more adventurous income investors.