Bitter Aftertaste At Salt And Lime

Salt & Lime, a non-bank Fintech lender, whose entire ‘loans combined with financial wellness education’ business model seems to be predicated largely on that of Wisr, has been placed into administration, with an administrator’s report hinting at murky dealings behind the scenes.

The business provides vehicle, personal and debt consolidation loans to consumers, who benefit from reducing interest rates upon completion of various financial literacy & education modules. 

It’s a cute and worthy concept, but for one fatal flaw: the overlap between consumers who want a personal loan for instant gratification (i.e. a new car today) and who also want to learn about personal finance (which is largely based on delaying gratification) is always going to be relatively small.

Salt & Lime raised $50m in debt funding – money to be loaned out to customers – from iPartners. Instead of using all of this money to fund loans, they instead (allegedly) used some of the funds to operate the business, including paying each of the two directors $377,000 a year, and also employing their wives at an average salary in excess of $250,000 per year.

On top of this, the report alleges, there were bonuses paid, presumably for performance, of circa $1.3m.

Whilst performance-related bonuses are common, the line at “growth businesses” can become blurry, given that whilst a business might be “growing” well, it might also be incurring hefty losses whilst doing so. Beware: growth at all costs, as the adage goes

Interestingly, whilst the administrators were called in June, Salt & Lime’s director and co-founder, Will Kiln, appeared on the Today Show discussing their latest research into financial wellbeing. Around the same time, the company entered Fintech industry awards, supported by financial data showing different results than those in the administrators report.

According to reports, there has been no comment or response from Salt & Lime.

Summary

With only allegations on the table currently, it’s tricky to provide balanced commentary on this story.

It certainly highlights the fact that the Fintech sector is doing it pretty tough through the past two years, and founders in some cases are looking at far-flung Hail Mary’s to turn the tide rather than knuckling down and trying to make sales.

If true, the idea that a fledgling, unprofitable start-up is using investor’s debt facility funds to finance lavish salaries and bonuses, is a particularly poor look, and a kick in the guts for those founders who are committed to their cause, no matter how difficult things may seem, and paying themselves just enough to get by whilst enjoying more than their fair share of $2 noodle dinners.

Be interesting to see how this unfolds.

SFD