This interview took place on the 22st of March 2019 with Bert Reila, the Affiliate Marketing Manager of Estateguru.
Why should we choose Estateguru over other crowdlending platforms?
One of the main differences is that EstateGuru offers only business loans – we do not give out consumer loans and we originate all the loans ourselves. This enables us to do thorough due diligence on all projects. We have an internal credit committee who looks through each loan application and decides what can be approved for the marketplace. Also, all of the projects on the EstateGuru marketplace are backed by a collateral. Having a collateral adds an extra level of security. This also means that in the event of a loan default (when a borrower is not able to pay back the loan), we start a litigation process and eventually can cover the loan amount by selling the underlying asset through a public auction.
What is the average interest rate of your investors?
As there is no costs for making the investments and at the moment we have managed to keep the loss of capital for investors at 0, then the return on investment can be seen as the average historic interest which is 12.25% from all repaid loans.
Could Brexit affect your investors in some way?
We have not yet fully analysed how Brexit might affect EstateGuru investors. The portal operates according to Estonian law and we accept investors from all over the world, as long as they have an EEA bank account or are able to use a 3rd party service like TransferWise Borderless, Paysera or Revolut for their deposits.
What percentage of loans default?
3.3% of the whole loan portfolio of EstateGuru is currently in default, but the capital loss of investors remains at 0.0%. We are confident that we can recover the funds that are currently defaulted. EstateGuru only finances projects that are backed with a collateral and which have a maximum LTV of 75%. In the event of a borrowers inability to pay back the loan, we put the underlying asset up for a public auction and return funds to investors by selling the collateral. EstateGuru nearly always (97%) provides collateral against a first rank mortgage, on certain cases 2nd rank. When EstateGuru has established a first rank mortgage then no-one can overcome this mortgage – not the bank nor other suppliers. When there is a second rank mortgage established, then the LTV still remains under 75% and in case of a bankruptcy no-one can overcome this claim. In that sense, the collateral remains to protect the investment at all cases. We follow each loan project closely and use soft methods to keep the borrower on track with his payments. When necessary, we start the sale of the collateral. For that we have professional partners in all countries where we operate.
What would happen if Estateguru goes on bankrupt?
EstateGuru is a facilitator of real investments, we do not offer the management of assets. All investment contracts are signed between the borrower and the investor, leaving EstateGuru out. All client funds are separated from EstateGuru’s operational funds. In case of EstateGuru´s financial difficulties or bankruptcy, client funds are safe and can still be accessed. In such an unlikely event, a contractual entity will be appointed to take over the role of EstateGuru to serve all the investments.
What is your borrower selection process?
The first criteria is the collateral of the loan, which needs to be realistically evaluated and which needs to have good liquidity. In addition to that, there mustn’t be any juridical problems that may affect the liquidity or value of the collateral. Secondly, we check the background of the borrower from different sources and we also always meet the borrower beforehand, to see if his plans are realistic and if he is competent enough to complete the project. This also includes checking the financial background of the borrower. In addition to that, we analyse the business plan of the borrower – is the plan realistic, how does the borrower plan to repay the loan and is the plan for repayment realistic as well – for example, is it possible to refinance it with a loan from a bank, is it realistic to sell the property in 12 months and is it likely that the project will be fully ready in that time.
How many workers does your company have?
We currently have 27 employees – most of them in our Estonian HQ. We also have offices in Latvia, Lithuania and the UK.
What are your goals in the short and in the long term?
In 2019 we stay focused on growth. In addition of looking to grow our loan offering and investor base, we are looking to build new partnerships with other Fintechs, Proptechs and innovation oriented traditional financial institutions. We also keep our eyes open at exciting investment and consolidation opportunities that would help to bring EstateGuru forward in a more effective way.
We closely monitor the economic and property market situation at both the micro and macro level and are confident that EstateGuru’s funding solutions are needed in every market environment. We have strengthened our risk and loan servicing teams who are ready to cope with any challenges that changes in the economic environment could bring. As strongly as we believe in flexibility and diversification, we also believe in being prepared for every situation.
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