The fintech that made $32m lending to customers banks reject

Source Funding has written about $2 billion worth of loans many to SMSFs which major lenders, with their “cookie-cutter” approval processes, often avoid.

Source Funding is carving out a niche providing property loans to customers the banks aren’t keen to serve, if at all.

The securitised lender provides self-managed superannuation fund loans, loans to the self-employed, low-doc loans and loans to expats.

“We excel where the banks are under-serving or not serving the market at all,” says founder and executive chairman Peter James.

For instance, if a customer goes to a bank for a self-managed super fund loan, approval can take months, which can often mean that the investment opportunity for the SMSF has passed.

James says Source Funding can give a conditional approval within 10 minutes and if a mortgage broker uploads the required documents into its system by midday, they can approve the loan by 5pm.

The business doesn’t take inquiries from retail clients. Instead, it provides finance to property buyers via mortgage managers, which James says are halfway between a broker and a lender. They manage and provide loans on behalf of a lender.

James had also previously founded a mortgage manager – Mortgage Ezy – and it was his frustration at getting poor service from lenders that prompted him to found Source Funding.

Sitting at number nine on the Financial Review Fast 100 List, the lender’s revenue has grown impressively, from $5.8 million in the 2023 financial year, to $21 million the following and to $32 million in the 2025 financial year.

But its growth since then has been even more impressive. Last year it was writing about $20 million a month in loans and that figure has increased tenfold to around $200 million a month this year, James says.

Another differentiator is maintaining service quality as it writes a higher volume of loans. Other lenders manually process loans, so when they get busy service levels dip, says James.

Source Funding uses its own decision engine box, which it calls DEB.

It uses artificial intelligence to speed up the loan application process that mortgage brokers carry out on behalf of their clients. The AI cuts down on the number of repeated entries a broker needs to make – for instance, entering an address just once.

AI also does a lot of things a credit officer would do manually. It searches for properties on RP Data and does an estimated valuation and rental opinion. It also searches for ABN.

Source Funding has written about $2 billion worth of loans and has so far funded its lending with warehousing facilities from banks – similar to a giant credit card it can draw on as needed.

But it will issue its first bond next year for about $500 million worth of loans and James expects it will do one or two such issues a year from now on.

James says major banks have a “cookie-cutter” approach and credit scores to approving loans for SMSFs so that they can process as many as possible.

Source Funding looks more carefully at each loan application and so can lend to SMSFs that banks might not.

“We take a more individualistic approach so that we’re looking at, you know, the whole loan and the whole situation, rather than trying to fit a round peg into a square hole, so to speak,” he says.

Original article from afr.com