When the sun is shining

The story of Sauleskredits.lv

Grupeer is happy to announce that we are adding one more loan originator to our platform- Sauleskredits.lv from Latvia. Read their story and find out how do they manage to stay on top of the game in a very competitive market.  

Who are Sauleskredits.lv?

Many years ago, good friends and future business partners came up with an idea to create a non-banking financial services company with a good reputation and, where an individual could get fast and reliable financing products. So, in 2008 the Sauleskredits.lv was founded, offering single payment and installment loans. Single payment is usually taken by working individuals before the payday.

The challenge of Sauleskredits.lv was to compete in already saturated fast-credit companies’ market in Latvia. Latvia is a leader in the Baltics in the popularity of Pay-day-loans. The official statistics say that almost one-third of the population has been a customer of a non-banking financial company. So, the solution was to introduce competitive interest rates, which would not pull customers in the debt trap and focus only on those people, who are officially employed.

The founders and management used their previous experience in short-term loan risk analysis in one of the top-rated Baltic non-banking credit institutions and applied it to the new company. Besides that, key people had almost a decade of experience in industry-oriented legislation discussion and forums attendance, witnessing regular legal amendments in Latvia.  Eventually, the founders contributed own funds and put a lot of hard work in order for a business to grow successfully.

The brand name Sauleskredits appeared in 2010 and wasn’t chosen randomly– it means sunny credit. The idea was to bring light and positivity to people with the help of Sauleskredits. Sun, in general, is the source of all life around us. Sun warmth and positivity drives people forward to their ultimate goals and objectives.

Sauleskredits.lv was one of the first non-banking companies to offer 1-2-3-year loan contracts with regular monthly payment. Moreover, its key competitive advantage was that it offered to combine other short-term small credit liabilities in one payment. This option most of the company customers consider being the best solution to minimize and stabilize payout procedure with multiple credit liabilities.

Business Model

There are three fundamental rules, which Sauleskredits.lv is following. Firstly, it is impossible to get a loan with no official job. Secondly, it is impossible to get a loan with credit liabilities exceeding regular official income. And finally, it is impossible to get a loan with active third-party credit collection processes.

By following these simple rules, the default rate is minimized. It is a known fact, that the default rates of non-banking companies cause them to charge high-interest rates. When the defaults are minimized, the rates are more affordable to customers and they are not forced to fail on their debt obligations. Many Grupeer customers are worried about high default rates on personal loans, but they shouldn’t. Grupeer never passes the risk of default to our customers. We give a loan to the non-banking institution, which manages the defaults internally. So, it is important for Grupeer to make partnerships with loan originators, who have found a “golden middle”.

The key to the success of Sauleskredits lies in its target audience. The company selects only locally employed persons with stable monthly income. Typical customers are middle-aged individuals and who are well-oriented in social life. The evaluation process is very tough, but it is essential and central to its business model. In order to remain competitive, the risk monitoring team has designed a scoring model.

After the potential client fills in an application on one of its websites- sauleskredits.lv or autososcredit.lv, the requested information is evaluated- whether it meets the minimal criteria. The requested documents are essential to the scoring model. The requested information varies from general information regarding regular income to credit liabilities with other banks and non-banking companies.

If all the necessary data is sent with no delays, it is possible to receive the loan in just 2-3 hours, whilst the decision is made in just 30-60 minutes.

Due to the tough requirements, 65-70% of applications are rejected during early evaluation stages and another 15-20% during in-depths credit loan application analysis.  This high rejection rate allows the company to have a low default rate. Moreover, once customers were approved, around 20% of them become returning clients and are considered less risky. In Latvia, the usual personal loan purpose is home renovation (33%), car purchase (26%) or traveling (10%).

The Product

  • Sauleskredits.lv offers 6-12-18-24 months credit loan contracts from 200 EUR to 3000 EUR.
  • Autokredit.lv (affiliated company) offers 6-12-18-24 months credit loans contracts from 600 to 4500 EUR to finance the car purchase.

Both products involve regular monthly payments on a contract basis. The average loan amount is around Eur 920-1000.

Latvian micro-financial climate

The application evaluation and screening processes are strictly regulated by internal policies of PTAC (consumer rights protection center in Latvia). According to Deloitte research of 2017, the regulation of non-banking loans in Latvia is more developed than in some Western & Northern European countries, such as Denmark, France, and Great Britain. Sauleskredits.lv strictly follows PTAC advice and recommendations during every loan application evaluation.

PTAC is actually very active on setting boundaries and upper limits of interest rates charged by non-banking financial companies in Latvia. The organization has set the ceiling several times during its history. Many non-banking financial companies were forced out of business due to these changes, as their business model can’t afford the low-interest rate.

The good news is that Sauleskredits.lv not only survived for more than 10 years but also that their interest rates are very competitive in this industry and they have plenty of room to increase them. Sauleskredits.lv’s regular monthly interest rate is 7-8%. Interest rate is strictly oriented on Latvia legislation and rules for non-banking financial companies. It is absolutely stable and competitive interest rate positioned in the middle price spectrum.

Where are we now

The biggest challenge of non-banking credit company in Latvia is big competition- it has too much supply for such a small population. However, Sauleskredits.lv dedicate itself only to the individual evaluation of every loan application resulting in the best possible non-banking financial offer. This helps them to grow steadily. The current loan portfolio is over Eur 1+ Million, whilst revenue just over Eur 47 Thousand.

The main goal of the company is to achieve strong non-banking industry position in Latvia. The long-term company development plan is to expand to other countries mostly in the EU and a possible expansion of products that are offered such as loans secured by real estate.

The team behind Sauleskredits.lv is ambitious and knows that in order to achieve such goals, the financing is needed to support growth. That is why it has decided to secure a partnership with Grupeer and get the funding to grow. We hope that our investors will love the new loan originator as much as we did when we learned their business model!

Happy investing!

 

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