IEG Holdings Corporation, which does business under the brand “Mr. Amazing Loans”, is the realization of several long journeys through finance, coupled and leveraged with a decade of financial evolution. Mr. Amazing Loans is the refined outcome of its Founder, CEO, and Chairman Paul Mathieson’s background in finance – which includes over 21 years’ financial industry experience in lending, funds-management, stock market research and investment banking – and a former Mathieson-led, Australian-based business model that lent ~$48 million to over 11,500 customers in the mid-2000’s.
Having realized success in using a prior, less-efficient, technology and capital-constrained model Mathieson relocated to the US in 2008 to replicate the base-platform model already established; utilizing cash flow from the runoff of the Australian loan book to fund the current US setup and utilizing the much improved global technology infrastructure to improve the second iteration of the model. On the back of the success of the Australian Mr. Amazing Loans business was born a more evolved, more FinTech leveraged model that has expanded on the foundation of its quasi-predecessor. “I believed I could set up a consumer loan business and do it better than competitors with superior branding, professional management and a much more cost-effective and fairer structure that was affordable to consumers,” said Mathieson.
A Problem, A Solution, A 50% Application Rate
With a customized, fully-integrated front-end website portal, back-end loan processing system, credit checking system, bank statement retrieval system, and multiple lead providers, Mr. Amazing Loans is a web-based property that has a cycle-tested 50%-plus application rate from prospects. The end result of this highly-efficient top to bottom prospect-funneling system is a platform with a low customer acquisition cost and a great customer experience. This matters when realizing that the Mr. Amazing Loans’ targeted consumer finance market tops out at ~$80 billion in the US alone. In Australia, using a predecessor model that was both technology and capital constrained, Mr. Amazing Loans captured a 10% market share.
“Our product is significantly cheaper, at 23.9%-29.9% per annum, than the long established ‘payday lending market’ that has been charging over 300% traditionally. In addition, other businesses are based on short-term, high returns whereas Mr. Amazing Loans possesses a model where we’re helping the consumer and doing what the government intends. We’ve received a lot of support for our model and consumers appreciate the differences. Mr. Amazing Loans’ $5,000 loan product sits right in the range of what the consumer wants and is where we believe the sweet spot is for targeting customers seeking $2,000 to $10,000 loans. Extensive historical static pool analysis leads us to believe that credit losses increase significantly for loans greater than $10,000 and customer lead acquisition costs make sub-$5,000 loans uneconomic. Further, short-term loans of less than 5 years don’t enable enough duration to earn a desirable return taking into account write-offs and customer acquisition costs. We really think Mr. Amazing Loans is a data-based, analytics-driven model that can scale as a result of our positioning and the economics we can achieve within this positioning framework,” Mathieson noted.
A Unique Dynamic
Due to the significant regulatory and capital barriers to entry, there are only a handful of direct competitors to Mr. Amazing Loans; including: OneMain Financial, Avant, Lending Club, and Prosper – which are all capitalized at over $1.5 billion. Mr. Amazing Loans’ indirect-competitors are credit card lenders, “payday lenders” with multiple storefronts and legacy physical infrastructure issues, online high-rate lenders, and tribal lender companies operating via tribal exemptions. Mr. Amazing Loans’ competitive advantages over these lenders include a significantly lower overhead driven by its highly-lean online model, its superior branding, its targeted marketing strategy, its affordable weekly repayments, and a strict regulatory compliance.
“The advantages Mr. Amazing Loans has over its competitors stem from the speed of online application and funding for the client; without compromising our high-hurdle underwriting standards we can take a loan from application to funding within hours of application completion,” said Mathieson. He added, “Another key advantage is the low weekly repayment cost of our loans only being $37.03 a week (principal and interest repayment) for a $5,000 loan over 5 years. Even better for the borrower, this is automatically direct debited from the customer’s account. We also hold the third largest number of state lending licenses of any company in the US. Licensing is becoming increasingly important as more state and federal regulatory scrutiny is bearing down on the industry. The regulatory scrutiny is especially directed at peer-to-peer lenders who don’t hold any licenses. Some of these regulatory issues have been extremely high profile as of late. Finally, for those considering the financials of the space, unlike peer-to-peer lenders we actually hold loans on our balance sheet, resulting in superior 29.9% gross revenue margins compared to ~2% gross revenue margins for many peer-to-peer lenders. You can imagine, with holding loans on our books, we want to do things the right way when it comes to underwriting and regulation.”
Data-Based, Analytics-Based, Responsible Growth
Carla Cholewinski, COO of IEGH, stated, “Current economic conditions provide the perfect time for Mr. Amazing Loans to be expanding across the US and rapidly growing our loan book. Demand for our loan product is at an all-time high. It’s rewarding to be able to provide risk-adjusted loans to consumers that are neglected by mainstream lenders such as banks and to be part of such a dynamic, high-growth organization. I also like that we have a model we believe generates a return that’s sustainable; one that we don’t believe is dependent on any material changes to current, status-quo assumptions for long-term sustainability and growth.”
IEGH has only recently entered an accelerated growth phase having established and refined its online operational platform, added efficient customer lead sources, and most importantly having secured increased capital. IEGH cumulative loan volume, which again is a function of its capital availability, rose 2,168% from $587,000 at January 1, 2014 to $13,314,023 at May 31, 2016. Full year revenue increased 2,815% from $62,949 in 2013 and 247% from $529,225 in 2014 to $1,835,165 in 2015.
IEGH, currently doing business in 17 US states, plans to expand into 25 US states – encompassing ~75% of the US market or ~240 million in total population. IEGH also plans to grow new loan volumes by leveraging a marketing strategy focused on and around prequalified, direct mail outs, online lead advertising with Google, Bing, YouTube, adding other online partners, and leveraging newly available, capital-driven growth runway.
Sustainability Isn’t Complicated, Neither Is The Future
IEGH has a highly scalable business model with low customer acquisition costs that operates in a data-defined zone of risk optimization. IEGH operates in a financial vertical with strong barriers to entry and where regulatory pressure will require competitors to attempt to obtain licenses or buy a group such as IEGH in order to continue to operate. IEGH is an emerging growth microcap company in the truest sense and although it still needs to further ramp up its volumes in the US, it has a proven business model that works, having recognized a problem and provided a solution. As IEGH expands and executes the Mr. Amazing Loans strategy, increasing corporate revenues should elevate growth and shareholder value.
“The business of Mr. Amazing Loans isn’t rocket science and that’s by design. Growth is driven by consistent risk-management and execution of our cycle-tested model. Utilizing our leading online loan platform, combined with cost-effective customer lead acquisition, thorough and highly efficient underwriting, and the ability to access appropriate funding, we should be able to continue to grow in a responsible, sustainable way,” Mathieson stated. “My 5-year vision is to become the McDonalds of small loans, to operate licensed and to lend online in 25 states within the US – which would expose our services to ~75% of the population. In the mid-term we’d like to be NYSE listed, carry a $1 billion plus loan book, and to continue to provide a great product for our customers and fantastic returns for our investors,” Mathieson concluded.
For more information about IEG Holdings Corporation, please visit: www.InvestmentEvolution.com
The company paid consideration to SNN or its affiliates for this article.
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