EstateGuru, a peer-to-peer lender based in Estonia facilitating secured loans, announced a partnership with Varengold Bank in Germany. According to a note from EstateGuru, the condition sheet provides for a fronting agreement where Varengold will provide a regulatory umbrella to EstateGuru to provide an investment and lending service in Germany. The country has long been home to a large number of EstateGuru investors.
EstateGuru is a pan-European marketplace facilitating property-backed lending for SMEs. Individual and institutional investors can invest in projects backed by first mortgages. Founded in 2013, EstateGuru lists securities offerings in 8 countries and has facilitated over € 263 million in loans. EstateGuru reports hosting over 64,000 investors and returning over € 20 million in interest payments (as of November 16, 2020). Earlier this year, EstateGuru raised over € 925,000 on Seed drills to a pre-money valuation of 28.8 million euros to help fuel the expansion of the platform.
Hamburg-based Varengold Bank was founded in 1995 and received a full banking license in 2013. The bank has always looked to the future, its main areas of activity being market banking and commercial banking. Within Marketplace Banking, Varengolc seeks to partner with European FinTechs, in particular lending platforms.
It should be noted that EstateGuru is not claiming any loss of capital. EstateGuru claims it only approves 10% of loan applicants and its average historical rate of return on these assets is 11.59%.
“The other two being technology and institutional investors,” said Pärtel. “Germany has been on our radar for some time. Our largest community of 19,000 private investors comes from here. It is therefore a logical step to become a full member of the alternative finance industry in Germany. To be fully compliant with the regulatory environment in Germany, we need to have fronting service cooperation with a local bank. As Varengold Bank is already a valued long-term partner and premier service provider for fintechs, we decided to ensure compliance by partnering with them.
Lukas Diehl, Executive Vice President and Head of Market Banking Services at Varengold Bank, explained that Germany is a heavily regulated market when it comes to financial services:
“Foreign fintechs tend to underestimate bureaucratic hurdles until they face them directly. EstateGuru has decided to meet this challenge by using the regulatory umbrella that we can provide through our full banking license. It is a perfect example of how fronting services enable the entry of companies with business models that bring innovation, new technologies and agility to the German market – to the ultimate benefit of all market participants. We are happy to contribute to the development of the market and proud to have the opportunity to showcase our expertise head-on as part of an expansion of our existing partnership with this Estonian fintech powerhouse.