Swell Finanzas en Movimiento launches on Mintos and offers to invest in car loans issued in Mexico.
Founded in 2010, Swell specializes in loans to small and medium enterprises. While the majority of its loans are leasing to cars, commercial vehicles and machinery, Swell also issues loans for working capital, unexpected expenses, asset purchase, and financing investment projects. Most of the car and commercial vehicle loans are issued in direct cooperation with the new vehicles’ dealerships, effectively increasing the average loan size above the market average.
With 32 team members and around 200 clients, the company operated with revenue of € 1,2 million, and an operational profit of € 689 000 in 2020. Swell’s net loan portfolio is € 9,8 million as of February 2021. The company reports having a loan default rate of 2%. The company and its portfolio are audited on a quarterly basis by the international credit rating agency HR Ratings, providing a yearly consolidated finance performance report that investors can find here. Swell is supervised by the National Banking and Securities Commission and the National Commission for the Protection of Users of Financial Services of Mexico.
The company has earned a reputable position in the market thanks to partnerships with Daimler, Volkswagen, Toyota Financial Services, and other companies for its leasing business. According to a corporate governance study conducted by the Asociación de Sociedades Financieras de Objeto Múltiple (ASOFOM), Swell is ranked in the Top 7 place among the best alternative lenders (known as SOFOMES). There are currently more than 1 700 SOFOMES in Mexico.
Swell during the 2020 pandemic
Swell reports that during the first waves of the pandemic when Mexico implemented its first strict restrictions prohibiting movement and multiple forms of businesses were closed, the lending company allowed some of its clients to extend their repayment schedules and only pay interest, so they could help their clients to survive (investors should note that the company won’t extend loans on Mintos). This helped Swell to control their non-performing loans (NPL) rate, and the company shares that most of the clients returned to their original repayment schedules. While the company admits the pandemic impacted their profits of 2020, it was seen as a necessary means to avoid an increased loan default rate. Swell’s management was prompt to react to pandemic impact across Europe and other countries prior to appearing in Mexico, by building a cash liquidity buffer and analyzing clients’ credit scores and ability to repay early on. As of Q1 2021, Swell has reduced late payments by 20-30% (vs Q3 2020).
Swell Mexico car loans on Mintos
On Mintos, Swell will list only financial car lease contracts secured with vehicles as assets, the most liquid collateral in Swell’s portfolio.
|Annual interest rates||Up to 11%|
|Average APR (Annual Percentage Rate)||30%|
|Average loan amount||€30 000|
|Average loan term||36 months|
|Skin in the game||10%|
|Mintos Risk Score||7|
|Interest on delayed payments||Yes|
The investment opportunity for Swell car loans is evaluated to have a Mintos Risk Score of 7, with the subscores of 8 for loan portfolio performance, 6 for loan servicer efficiency, 6 for buyback strength, and 5 for cooperation structure. In addition to the direct assignment, Swell has also implemented an extra layer of security by establishing a pledge over listed loans in favour of Mintos investors.
Swell implements a thorough credit scoring of its clients. The automated process includes in-depth analysis of business activity, credit history, annual tax return, guarantees and appraisals, as well as the main activities of the potential client before each case is reviewed by a scoring committee. All loans are secured with collateral and issued directly to the dealership which helps avoid any potential fraud or misappropriation risk. When it comes to debt collection, over 90% of Swell loans are collected by automatically debiting the borrower’s bank account.
Comment by Swell’s CEO
“We are very excited and very thankful for the opportunity to join the Mintos marketplace. We are looking to do everything in our power to be transparent, forthcoming to investors, and be a great representation of Mexican lenders on the marketplace. We see Mintos as a big step in Swell’s company’s story and as a strategic partnership. It’s also been a great experience going through the due diligence process which was of superb quality, compared to what I’ve seen in my 20+ years of experience in the finance industry. Having an ally like Mintos will ensure the continued growth of the portfolio during the 2021-2022 period,” says Ernesto Vela Berrondo, CEO of Swell.
Before becoming the CEO of Swell, Ernesto Vela Berrondo had worked as a stock trader and financial consultant at Merrill Lynch in California US, and for the past 25 years had been working for HSBC as an Executive Director, while also assuming the seat of an external advisor to Swell for the past 5 years. He has 27+ years of experience in finance, investments, and debt markets.
How to invest in Swell Mexico car loans
Swell car loans will be added to the Diversified and Conservative strategies. If you want to invest in these loans with a custom automated strategy, make sure to adjust your strategy settings. If you’re investing manually, you can filter the loans on the Primary Market.