Pepper leaders have big plans for little lender

They led Pepper for close to a decade. Now Patrick Tuttle and David Holmes have their sights set on “industrialising” the SME lender they acquired last week.

On Friday (22 September), former Pepper Group chief executive Patrick Tuttle, fellow Pepper alumni David Holmes and ex-Virgin Money treasurer Philip Sullivan acquired Little Lease Company for an undisclosed sum.

It was the first time the small-ticket asset-backed lender has changed hands in almost 20 years.

Mr Tuttle told Mortgage Business that these smaller ticket items are not something the major banks have much appetite for.

“It is almost too small for them,” Mr Tuttle said. “It is fiddly. And when the banks get involved, they usually want access to the business owners’ residential property as security.

“I think the real flexibility for us is being able to carve out niche funding for small businesses. They can use us to fund what I call ‘business-critical assets’. You’re talking about a coffee shop owner buying a new coffee machine, for example. Instead of using his CBA line of credit, he can get a dedicated line from us to find that specific asset.”

Mr Tuttle and his partners spent a decent amount of time in the data room doing their due diligence. He said that Little Lease Company has “very good systems, great people and a strong-performing portfolio”.

“They clearly understand their credit,” he said. “What we’re looking to do is industrialise the platform. Enhance the existing processes, add some level of automation to the front-end and expand the distribution.

“David [Holmes] and I have deep relationships across the finance broking and aggregator space.”

Over time, the new owners plan to partner with Australia’s aggregation groups. For now, the group will improve the company’s existing processes before scaling up.

Mr Tuttle said: “We have entered into a warehouse arrangement with a large domestic bank to fund the transaction. We have refinanced the portfolio, which gives us the ability the scale the platform over time."

At Pepper, Mr Tuttle and Mr Homes ran warehouse lines in the billions. The pair have significant experience and are likely to add more products to Little Lease Company's offering. There is a big opportunity to expand into self-employed finance and even residential mortgages for small business owners in time.

Established in 1999, Little Lease Company originates new business from various sources, primarily through finance brokers operating in every state and territory in Australia, as well as through repeat business with long-standing customers.

The business was originally acquired by its outgoing shareholders in 1998 from Metway Bank.

Co-owner David Holmes, who stepped down as Pepper’s COO earlier in the year, said: “The credit quality of the loan book is very strong, providing us with a solid foundation from which to further industrialise the platform and grow market share through diversified distribution channels, particularly our national finance broker network and through the establishment of a small number of bespoke vendor financing arrangements.”

[Related: APRA controls on non-banks could trigger 'credit crunch']

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