Finance Direct concentrates on brokerage

NZF announced the sale of its 70% stake in Finance Direct to its managing director Wayne Croad at the end of March, who owned the other 30%, but didn't say at what price.

Croad, who says: "I felt elated. It's a really good feeling" to gain full ownership of the company, says the terms of the sale are confidential.

NZF bought 51% of Finance Direct in April 2007, paying $1.425 million. In December 2008, it increased its stake to 70% for an undisclosed sum. However, NZF's annual reports for the years ending March 2009 and 2010 valued the stake at $1.708 million.

Finance Direct has always had a big brokerage business which means it isn't completely dependent on its finance company and investor loyalty to keep taking up its debentures, Croad says

The only loans the finance company will fund are the best quality prime loans - it will provide up to $12,000 per loan. "They're all interest and principal. We don't do any capitalised deals," he says. "We're at the real conservative end with our own money."

But it's also happy to deal with a wide range of customers, brokering loans it can't write itself to other finance companies.

Croad says most of his business these days is broking. "We're still writing about the same amount of business. We're just passing it on to other lenders."

Finance Direct's latest accounts show a $114,000 net loss for the six months ended September last year compared with a $60,000 net profit in the same six months a year earlier.

Croad says that partly reflects conservative provisioning with $145,000 charged against profit for bad loans, up from $52,000 in the year-earlier six months.

Since inception in 1999, Finance Direct's total actual bad loans have totaled less than $300,000, he says.

Because its total assets at September 30 of $4.3 million, well down from $7.7 million at March 31, are well below the Reserve Bank's threshhold, Finance Direct doesn't need a credit rating.

Comments from our readers

On 31 July 2011 at 5:07 pm Amature Investor said:

From all accounts, FDL sounds like a very well run and respectable finance company at a time where finance companies are synonnymous with failure. From an investing point of view FDL's deposit rates are second to none which begs the question: what am I missing here? With high returns comes high risk (obviously with the US debt crisis, NZ is vulnerable to further dips in the economy) but how this will effect a small, conservative lender like Finance Direct we have yet to see. And what were MD Wayne Croads' possible motives in buying out NZF? Wouldnt a large company like that behind you induce greater investor confidence?

On 5 August 2011 at 3:52 pm Mistro said:

With NZF Money going in to receivership Finance Direct is probably better off without them. Looks like they will have their work cut out though, the recent accounts on their website show a loss for last year of $448,000 which is huge for a small company with only $3Mil of loans. They like NZF are obviously not as good at lending as they make out. I would not rely on comments made by the company but will be interested to see their Prospectus in due course as this is a terrible result and has lessened their equity to just over 1.0M. I can't see how a Prospectus model works for such a small company, the compliance costs are just to high to make this a viable proposition.

Finance Direct concentrates on brokerage

Following NZF Group selling out, consumer lending specialist Finance Direct will mainly focus on its brokerage business, including mortgage broking, although it continues to maintain a small finance company.

Monday, April 11th 2011, 5:00AM 2 Comments

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