Best Guess estimate
Assumptions:
Metric
Estimate
1 Average loan amount
$2,000
2 Number of loans/year
50,000 (based on FY24 applications)
3 Approval rate
60% (conservative, so 30,000 loans)
4 Interest rate charged
20% p.a. (standard for unsecured personal loans)
5 Term
12 months
6 Default rate
5% (moderate risk profile)
7 Cost of capital
0% (equity-funded) or 8% (if debt-funded)
8 Admin cost per loan
$50
1. Revenue from Interest
30,000 loans × $2,000 = $60 million loan book
Annual interest at 20% =
$60 million × 20% = $12 million interest income
2. Cost Breakdown
Option A: Equity-funded (no cost of capital)
•Defaults: 5% × $60 million = $3 million loss
•Admin costs: 30,000 × $50 = $1.5 million
Total Costs = $4.5 million
Net Profit = $12M − $4.5M = $7.5 million
Margin = 62.5%
Option B: Debt-funded at 8% cost
•Capital cost: 8% × $60 million = $4.8 million
•Add defaults + admin = $3M + $1.5M = $4.5M
Total Costs = $9.3 million
Net Profit = $12M − $9.3M = $2.7 million
Margin = 22.5%
Best Guess Summary
Scenario
Estimated Net Profit
Profit Margin
1 Equity-funded
~$7.5 million/year
~62.5%
2 Debt-funded (8%)
~$2.7 million/year
~22.5%
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