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Throwing a funding lifeline

10 November 2016

Through experience LendMe founder Marcus Morrison knows just how hard it can be to get business funding, so he did something about it.

Financing business growth can be a huge challenge for SMEs, but with the arrival of peer-to-peer (p2p) lending, business owners finally have a viable alternative when it comes to securing funding.

Also known as marketplace lending, peer-to-peer lending enables people who need money (borrowers) to borrow from those who have it (lenders) through a medium (online) that takes the emotion and stress out of the equation. Borrowers obtain a new source of funds from a lender that is often more flexible than the banks, while lenders obtain far better interest rates.

Of the four p2p lenders to burst onto the scene in recent times, LendMe is the only one to offer mortgage-secured lending on loans up to the value of $2 million, making it a feasible source of capital for growing businesses.

Marcus Morrison is CEO of LendMe and the 37-year-old knows what it’s like to be denied a business loan from a bank. Fresh out of completing an honours degree in psychology, a then 23-year-old Morrison went cap-in-hand to his bank, and asked for a loan to start a Bubble Tea store. “They politely told me to p… off,” Morrison recalls.

It’s hard to blame them. Sixteen years later, the Bubble Tea boom is only just starting to take off in this country. For those unaware of the craze, Bubble Tea originated in Taiwan in the 1980s and is a tea-based beverage mixed with fruit or milk, with chewy tapioca balls or jellies added to form the ‘bubbles’. Morrison was undoubtedly ahead of the curve with his Bubble Tea store idea, which he eventually managed to finance after an aunt agreed to be guarantor on a bank loan of $140,000. Housed within Wellington’s Reading Cinema complex, the business was profitable by month three.

Looking back, Marcus concedes it was a fairly big risk to take, especially as it defied the well-meaning advice of most, including his older brother, a solicitor. “I never thought it was going to be anything other than successful. I’ve always just thought, there’s no problem you can’t solve, even if you have to find someone to help you solve it. And there’s nothing that I won’t put into it, time and effort-wise. I just wouldn’t let it fail. And my aunt was good enough to believe in my hard work,” says Morrison. That propensity for good old-fashioned hard work was honed on the Wairarapa farm where the Morrison family were fifth generation sheep and beef farmers.

“I come from a farming background, where people are relatively practical and you just get in and make things happen for yourself.” A future in farming was looking likely for Morrison until a family tragedy turned their idyllic farming life on its head. When Morrison was 11, his Dutch mother upped sticks and took Morrison and his four brothers to live in Holland.

“It was the catalyst for a huge life change,” he recalls. “At that point we’d lost the farm. Mum wasn’t earning much so we went from having a lot to not having much.” Marcus found adapting to life in central Amsterdam very difficult, so in protest he refused to speak Dutch for five whole years (a dogged effort considering he attended a Dutch-speaking school). But he says he certainly learnt to be adaptable. “It made me fiercely resilient and made me realise your ship needs to run on your own steam. “It’s not always going to be easy or smooth and you’ve got to build that into your plan and build resilience into the system and try and really make it happen for yourself.” This trait served Marcus well through his early career as a management consultant where he worked solving a diverse range of commercial problems for an equally diverse range of clients such as Nokia, HSBC, Boeing, Telenor in Norway and a number of banks. “I was looking specifically at this concept of a changing world, changing technology and a requirement to operate differently for all of the businesses. “I think a lot about businesses; what they’re doing and how they’re operating and why they’ve done it that way. And from that perspective I think I’ve always been almost perfectly suited to being a consultant. Because being a consultant really is about taking ideas from one place to the next and tailoring them and making them work. And that’s what I’ve had to do for LendMe as a start-up. What is it we’re going to do that’s different, or better? And how are we actually going to deliver on that?”

The dawn of disruption

The idea for LendMe initially came about when two lawyers (one of them Morrison’s brother Edwin) were thinking about creating a business similar to a solicitor’s nominee company. “I had been talking to them about the disruption of the banks. And particularly the fact that I think there’s a place to do things a little bit differently. I’ve always enjoyed the challenge of having a blank canvas to work from.”

“There are a lot of people who are extremely bankable. Decent people who don’t want to be shackled by really expensive borrowing and the negative impact of that.”

With record low interest rates and banks being reasonably tight on lending criteria, Morrison admits the current environment offers the year-old company a ‘perfect storm’. “As a result there are a lot of people who are extremely bankable. Decent people who don’t want to be shackled by really expensive borrowing and the negative impact of that. And we can help pass this on to lenders who, if their money is sitting in the bank, are not getting great returns otherwise.”

Since soft launching in February, LendMe has already had almost $3 million worth of loans through its online system. Asked about the often-raised criticism that the fledgling p2p industry has not yet gone through a crash cycle, Morrison is optimistic. “Yes, the tail wind is definitely in our favour. But you just have to tack into the wind if things change, and we’ll prove that this has a place.”