Microlender Dolla Financial is considering stripping itself of subsidiary Ultra Financier, in a move aimed at preparing the luxury loan business to raise its own capital.

Ultra Financier was formed just four months after Dolla Financial’s historic initial public offering (IPO) and listing on the Junior Market of the Jamaica Stock Exchange in 2022. At the time, Dolla stated that it was experiencing high demand for asset-based lending to high-net-worth individuals which led to the creation of the wholly-owned subsidiary.

Today, Ultra Financier boasts a loan book of approximately $1 billion; but Chief Executive Officer David Henriques wants to double that number and expects to accomplish that goal through debt or equity raise.

“We are interested in an IPO, so Ultra would then be a standalone company from Dolla Financial. We are doing our due diligence, discussing it at board level now and working through the numbers to see if it would make sense,” Henriques said in responding to questions from the Sunday Finance.

While a target date for the IPO has not been disclosed, discussions are ongoing. The move toward an IPO coincides with a rebranding effort to reposition Ultra Financier as a provider of private credit, shifting its focus away from luxury asset-based lending.

Henrique said that despite the company’s marketing efforts around accepting luxury jewellery, handbags, and yachts as collateral for loans, it has yet to use any of these items as security. He added that the majority of collateral presented has been in the form of real estate, motor vehicles, equipment, and stocks.

“So we really won’t be doing anything different from what we have been doing. The rebranding is really for transparency and to let our customers know that we are just like any other private credit lender in the market,” he said.

“Sometimes people mistake us for a pawn shop because of the marketing around luxury items, so we want to correct that and establish ourselves as a premier private credit company,” the CEO added.

The change aligns Ultra Financier with competitors such as Sygnus Capital and Carilend.

As part of the rebranding exercise, the company will also raise the minimum loan disbursement to $5 million from the previous $500,000. The loan ceiling of $150 million has also been removed, Henriques said.

“We will leave loans smaller than $5 million to Dolla Financial, as Dolla operates under the Microcredit Act, while Ultra is not governed by that Act,” he explained.

Private credit, also known as private debt, refers to lending and borrowing outside the traditional banking system. Loans from these institutions usually attract a higher interest rate, but the upshot is faster approval times and a higher success rate.

This type of credit has seen rapid growth globally since the financial crisis in 2008 in part because people sought more confidential, swift and flexible financing solutions compared to traditional banks.

Ultra Financier’s clientèle is made up of a few residential customers, but the majority of loan applicants are real estate developers, medium-sized and large business operators. On average, it disburses loans valued at $30 million.

Based on the loan demand, Henriques wants to double the value of its loan book by the close of 2024, before quadrupling that number in 2025.

“Short-term plans, if we are talking about six months, we are aiming to hit a loan book of about $2 billion and then moving into next year, once capital is available to us we want to see if we can double that,” he said.

Both Ultra Financier and Dolla Financial have been reporting steady improvement in their business ventures over the past months and it’s on the path to outperforming those numbers.

For the first half of the year, the Dolla Group registered net profit of $284 million, 25 per cent up from $227 million in the corresponding period of 2023. The group is working to execute a fund-raising exercise before the close of its third quarter which ends in September 2024.

CEO of parent company, Dolla Financial, has hinted at a $2 billion raise, part of which may be used to prepare both Dolla and Ultra Financier for the busy Christmas season.