Selina raises $150 million to provide flexible loans that leverage home equity – Techdoxx

Deepak Gupta February 8, 2022
Updated 2022/02/08 at 12:29 AM

For many of us, our home is by far our greatest asset, and in the fintech world, this has led to a logical extension: when you need money, borrow against that greatest asset. Today, a London fintech called saddlethat provides consumers with flexible capital on five-year terms against up to 85% of the value of their homes – so-called equity line of credit (HELOC) loans – is announcing $150 million in financing on the heels of earning $100 million in loans to homeowners.

The $35 million Series B equity tranche is being led by Lightrock, with previous sponsors Picus Capital and Global Founders Capital also participating. (The latter two companies are linked in part to the Samwer brothers, who also built the Rocket Internet e-commerce incubator in Berlin.) The remaining $115 million comes in the form of debt from Goldman Sachs and GGC. Hubert Fenwick, the CEO who co-founded the company with COO Leonard Benning, said Selina is not disclosing its valuation on this round, but a source said it is based on the standard Series B dilution that comes in at about $140. millions.

Selina plans to use the funding to continue expanding its UK business before considering how to tackle other markets in Europe, which Fenwick called a “blank space” because of how nascent the HELOC market is; and launch more products around its lending business, including a credit card it will launch this year that will withdraw funds from a customer’s loan to make funds more accessible.

The UK market is ready to be conquered and the size is huge,” Fenwick said, estimating the potential asset base for UK homes at $30 billion. “We need a war chest to unlock this so we think the cash flows will support the UK business very quickly, but we also need capital to grow in international markets.”

When we last covered Selina in July 2020, the company was breaking new ground in the UK and has just raised $53 million to provide its HELOC service to small and medium-sized businesses, not individual consumers. Fenwick tells me that consumers have always been in their sights, but the company needed to secure regulatory clearance first.

“The real opportunity was the consumers,” he said. That happened in late 2020 and now 90% of Selina’s business is consumer loans, he said.

In both cases, the gap in the market is the same: people who need capital for a large project, say a building renovation or for educational purposes, can apply for a loan from a bank or refinance their homes to buy some liquidity. extra. Selina’s HELOC approach differs in part because of the speed at which its loans are approved – money can be available as quickly as 24 hours – and the fact that funds are distributed as needed, which means consumers are paying only interest on the part they eventually withdraw.

These might be seen as competitive with mortgage refinancing, but in fact Fenwick said the opposite is the case: Banks are strong partners for Selina because they are always looking for ways to keep customers from abandoning their mortgages and refinancing. to get some liquidity is often a way for their customers to unwind. Offering these customers an HLOC is one way to keep them from touching their mortgages. But it’s not an area banks would necessarily touch, he said.

“HELOC is the reserve of specialist lenders who match credit card-type charges with mortgage loan guarantees,” said Fenwick. “You have to manage liquidity in a different way. The primary mortgage market is much larger, so banks prefer to partner with smaller companies and retain the mortgage customer. [as is] instead of entering a new market.”

Fenwick notes that Selina is typically analyzing a mix of its own and third-party data to determine a person’s eligibility for a loan and to run different aspects of the business, and that data science creates another barrier to entry for others to compete. “Our algorithms are proprietary and specialized for the loans we make,” he said. “The pile is too long.”

Selina finds that since you only pay interest as you withdraw funds, the fees you pay back each month will not be as high as someone borrowing and withdrawing a fixed amount. A comparative chart of a £50,000 loan shows how it works:

HELOCs are relatively common in the US, notes Fenwick, where it is estimated to be a $150 billion market, with some of the biggest names in the industry including Blend (which is now public), Noah and Hometap. The approach is relatively new in the UK, although Fenwick believes it will likely (and quickly) evolve not just because HELOC companies like Selina’s are getting the green light, but because of the ubiquity of home ownership; and the fact that more people, as they commute less due to the pandemic, have turned their attention to spending larger amounts on things like home renovations or less frequent but much bigger vacations.

“Historically, homeowners across the UK have been underserved when it comes to accessing the wealth created from their greatest asset – their home,” Ash Puri, growth investor at Lightrock, said in a statement. “The Selina team has achieved impressive growth with over $100 million in loans issued since founding in 2019. Lightrock is pleased to support such an innovative team and looks forward to supporting Selina as it disrupts traditionally inflexible lenders.”

“Selina Finance’s HELOC product is innovative and bridges the gap between the consumer credit and mortgage markets,” added Anna Montvai, Executive Director of Goldman Sachs. “We are excited to support the Selina Finance team in growing their business and loan portfolio.”

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