Some great questions were asked and given that they could well be questions you've also had on your lips, we thought we'd share the most relevant:
How much is in the Reserve Fund?
It’s on the website so check it out. It’s currently sitting at around $220k, but it is designed to ebb and flow with arrears and write-offs, so it does jump around a little.
The Reserve Fund provides cover for borrower repayments in arrears (i.e. someone who misses a payment and then catches up). Currently, the fund is covering around $30k of borrower repayments in arrears, so the actual amount of the Reserve Fund is closer to $250k (assuming all of the arrears balance is repaid in time). It’s currently receiving around $16k per month of new reserve levy contributions (taken out of each borrower repayment) and because of good loan behaviour coming through we’re expecting it to steadily increase. Because the reserve fund receives contributions from each scheduled borrower repayment (rather than as a lump sum when the loan is first written), the fund will take time to grow. But it also means we’ve got a whole lot of future Reserve Fund levy which we know is going to come in over the next 24 months or so as the loan book matures.
Is the Reserve Fund cash in a bank?
Yes, it’s physical cash, sitting in a trust bank account owned by the investors. The funds aren’t used or in any way available to Squirrel Money.
How big a loan book do you need to be solidly self-sustaining?
What a good question, and one we ask ourselves regularly. We’re fortunate enough to have another arm of the business (Squirrel Mortgages) which makes up a large proportion of the group’s revenue. So it’s helping subsidise staff and getting systems in place. Based on our modelling, we estimate the loan book will reach the breakeven point when the active loan book is somewhere between $20 million and $30 million. We’re just over $10 million now, and it’s growing at about $1 million per month so somewhere in the next 12 – 20 months we’ll reach that point where it’s self-sustaining.
When are you going to list on the NZ stock exchange?
To give some background, in April 2016 the Squirrel group raised $3.4 million through Snowball Effect. So as part of that process, we acquired 158 new shareholders. At the moment there’s no market to sell those shares, other than private sale. So to bring liquidity to the shareholders and get a market appraisal you need to be listed on an exchange somewhere.
There’s no definite plan to list at the moment. Listing is a pretty costly exercise and we want to make sure the business is in a very good shape before heading down that track. We have a pretty clear trajectory for when we think that point will be. It won’t be this year, but maybe sometime in the next two years. With everything we have on the go there will be a need for capital and that need will create some sort of an event – whether it’s a significant investor or a listing. Our main concern at the moment is the decline in the Auckland housing market.
Hopefully this has been useful, and if there's anything else you'd like to chat through, you can always give our customer service team a call on 0800 21 22 33 or email email@example.com.