Tale of Judo Bank: The Latest FinTech Unicorn Amid COVID-19 Crisis

  • May 11, 2020 AEST
  • Team Kalkine
Tale of Judo Bank: The Latest FinTech Unicorn Amid COVID-19 Crisis

Australia is a country of small businesses, which are the engine room of the economy, according to Kate Carnell, the inaugural Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Australian Government.

Small Business Counts report released by ASBFEO in July 2019 highlighted that small businesses employ 44 per cent of Australia’s total workforce and account for around 35 per cent of the country’s Industry Value Added (IVA).  

Small and Medium enterprises (SMEs), important for economic growth and employment, are more inclined towards creative thoughts, thus, they are more likely to bring new and innovative products to the market. However, securing funding is a major obstacle for these businesses.

The SME Banking Insights Report of Judo Bank for 2019 has highlighted a funding gap of $90 billion in Australia for businesses with a maximum turnover of $20 million, up from $83 billion over the past 12 months. The report released in September 2019 was based on an independent survey covering experience of 1,750 SMEs and managers.  

Judo Bank is an Australia-based bank that focuses on catering to the requirements of SMEs with respect to gaining access to funding and services they deserve. With its vision of transforming banking for SMEs in Australia, Judo Bank is challenging the one-size-fits-all approach while pledging to bring back the art of relationship banking.

About Judo Bank: The Latest FinTech Unicorn in Australia

Judo Bank, founded in 2015 by David Hornery and Joseph Healy, was officially launched in March 2018 to cater to the needs of SMEs. Subsequently, in April 2019, a full banking licence was granted to Judo Capital from APRA, now known as Judo Bank. The bank is headquartered in Melbourne, with other offices in Brisbane and Sydney.

Judo Bank, which has taken deposits valued at $1.5 billion and made $1.6 billion in loans, has 55 bankers serving 650 customers.

The bank recently secured the latest FinTech unicorn status in Australia, as it closed a new funding round worth $230 million to reach the coveted valuation of more than $1 billion. The valuation of all other banks has been impacted by the extreme volatility in the global market, owing to the COVID-19 pandemic.

Given the challenges arising from novel coronavirus, Judo did not bring any additional shareholders and only existing shareholders took part in the funding round including the Abu Dhabi Capital Group, Bain Capital Credit, Ironbridge, Myer Family Investments, OPTrust, SPF Investment Management, and Tikehau Capital.  

This is the third funding round for the bank. In July last year, the second funding round had enabled Jubo Bank to raise $400 million, which was also deemed as largest funding in a single round in the history of Australia.

 

 

Besides equity, the bank has also received debt funding of $800 million from some of the big investment banks. The bank is well capitalised with strong pipeline of new loans. It also holds a strong liquidity other than its deposits, funding and government schemes.  

Do Read: A Quick look at three Neo Banks in Australia - 86 400, Xinja, Judo

$500 Million Government Funding Exclusively to Judo Bank

In early April 2020, Judo Bank received a funding of $500 million from the Federal Government, cementing the bank position to continue providing substantial lending opportunities to SME businesses struggling due to coronavirus impacts. 

The bank is currently focused on helping SMEs facing challenges in the wake of the COVID-19 outbreak.

Must Read: COVID-19: cash & capital means oxygen & ventilators for companies

Government Initiatives to Help SME Lenders

Start-up financial institutions are being supported by Government and other authorities with large amounts of capital and several other schemes to mitigate the impact of COVID-19.

The schemes introduced by the Australian Government, Reserve Bank of Australia, Australian Prudential Regulation Authority, and several state Governments are targeted towards:

  • Allowing the flow of credit in the country’s economy
  • A sustainable and profitable future of SMEs.

 

Following are some of the initiatives introduced in Australia to support and strengthen SMEs:

  • Coronavirus SME Guarantee Scheme: As per this scheme rolled out by the Australian government, RBA and APRA, the Government is giving a 50 per cent guarantee for new and unsecured SME loans issued by lenders. These lenders are SME specific such as Judo Bank.
  • Extension of deferred repayments on Business Loans: The Government has allowed businesses to defer repayments of loans for six months. The loan facility of a maximum of $10 million is granted under this scheme. Additionally, the banks have agreed not to impose non-financial breaches of the business loan contract.
  • Tax relief: For businesses with a turnover of less than $50 million (before June 2020), the credit of a maximum $50,000 of the PAYGW Tax obligation is allowed. Also, further credit of maximum $50,000 is permitted for the period of July - October.
  • $130 billion JobKeeper Payment: To lessen the financial distress caused by coronavirus, businesses can avail a subsidy in wages for eligible (full-time, part-time and casual) employees. The amount of subsidy is a maximum of $1,500 per fortnight in wages, starting from 30 March 2020 to up to 6 months.

 

Also Read: Government and Digital Banks at the Rescue of Australian Businesses

 


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