The new way to borrow and run business - Interview with François Lévy, Founder of Loansquare.
Could you present Loansquare platform solution? In what is it innovative in terms of financing?
Our solution is the first SaaS solution allowing Corporations to request for new loans and to monitor them after the closing in a 100% digitized way. Corporations can decide to connect with their partners, including banks, investment funds, but also lawyers, auditors…
Our company proposes simultaneously a loan management platform, a shared agenda and data-room, as well as a secured communication system between all parties to a loan.
I founded it two years ago with two partners: Etienne Royole, a former colleague in my previous Investment Banking consulting firm, and Jean-Pierre Schmit, CEO of Jemmic, a lux IT company focused on the development of secured applications for Banks. Jemmic is the provider of Trafec, a SaaS multi-bank platform used in the trade finance at Geneva. It enables Corporations to issue Letters of Credit with a dozen of Corporate and Investment Banks.
When we met Jean-Pierre for the first time in Paris, we directly agreed on one thing: if we can change the way we do trade finance, why would it be impossible to do it with financing activities as well?
A couple of weeks after, we had a common vision: digitizing the full credit chain, to drastically decrease risks and time processing, and at the end of the day, to reduce fees paid by borrowers. As of today, we back-tested platform with two tiers-1 investment banks, and can already use our solution to send instructions to banks, receive digitized term-sheets and compare them with your own benchmark grid. This is already a huge step forward for the financing world, but we want to go even further by automating term-sheet generation, agency management.
"If we can change the way we do trade finance, why would it be impossible to do it with financing activities as well?"
- François Lévy, Founder, Loansquare
Complex lending operations are not ‘industrialized’ and still highly manual or paper-based. Do you think that a loan platform will have the same success as FX platforms or Money Market Fund platforms?
How can you explain that 90% of derivatives are now managed through platforms versus less than 15% for loans?
We now have the right technologies to be able to handle large and complicated derivatives…why not for loans? This is our solution: we bring best of breed technologies, we a high level of security, to allow our customers to experience a new way to borrow and run their business.
Whatever the kind of loans you deal with, a lending platform brings significant benefits: for a vanilla loan, in a matter of months, you will be able to manage it 100% online, even on the legal aspects; for complex structured deals, we move step by step with our customers, focusing first on interactions between financial institutions and borrowers, to finally integrate the whole ecosystem into our platform (including pools of banks…, export credit agencies…).
Financing is the last unindustrialized market of the financial services. The loan market is the next sector which is going to be impacted by platformisation. Even if Banks are aware of this, they are mainly focused on the interbank market (agency processes), whereas our priority is to provide borrowers with simple and innovative services to finance their activities.
What are the benefits for a corporate to go through a platform instead of directly reaching its bank? Is it an opportunity to get access to other lenders? To better benchmarks? To share its loan business among a larger number of banks?
First of all, we see few banks developing their own client portals, but what borrowers expect is a single multi-bank platform to manage loans. It is obvious that requesting for a new loan requires to connect with several financial institutions and to compare their offers. The added value of a multi-bank platform is also high to follow-up your portfolio. All companies work with several banks even most of Small and Medium Companies.
What are the difficulties encountered when you develop such a platform? Apart from the changes in use and market practices?
One of the most important milestone toward success is the ability to create a network effect, to keep bringing more and more corporations and banks on our platform. Nonetheless, we also propose internal modules to our customers, in order to boost their capabilities on the short term, and prepare them to the incoming platformisation of lending activities.
Another challenge is to show to Banks that Fintech startups are an opportunity to bring a lot of value to them and their clients. Banks must understand that platformisation enables them to reduce costs and risks with straight through processing.
Another key success factor is the evolution of the regulatory environment. In the same way as MIFID or PSD2, you could see new requirements forcing Banks to trade through platforms or to open their data to external providers willing to enhance client experience. The Anacredit reporting is the first step toward more transparency on the Loan Market, and platform like ours can help financial institutions and corporations to be compliant.
How could the association of corporate treasurers help you?
We already work closely with the French association of corporate treasurers. The best way to move forward is to launch “real” pilots with a group of motivated treasurers. In France, we work on the business aspect (covenants, drawings…) but we also explore IT innovative solutions, notably around Blockchain and smart contracts application to loans. Send us a quick message on our website so we can start working together toward building the next-gen lending platform!
Could we envisage to use Loansquare platform to manage intercompany financing transactions or third-party financing (for groups that finance their counterparties/clients)?
Of course, you can! Our platform is built to handle most of real world use cases, and can be offered in white label licensing for major banks and corporations. In addition to traditional lending processes, we also cover intercompany financing, internal portfolio management, and even secondary market platform for investors. Our aim is simple, become the leading European platform for lending activities