MoneyMe (ASX:MME) share price jumps 10% on Westpac (ASX:WBC) funding deal

The MoneyMe Ltd (ASX:MME) share price is storming higher on Tuesday after announcing a new funding deal with Westpac Banking Corp (ASX:WBC)…

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The MoneyMe Ltd (ASX: MME) share price is jumping higher on Tuesday after the release of an announcement.

In morning trade the digital consumer credit company's shares are up 10% to $1.65.

What did MoneyMe announce?

This morning MoneyMe announced that it has established a new warehouse funding facility led by Westpac Banking Corp (ASX: WBC) that reduces its funding costs by more than half.

The new warehouse facility has been set-up to scale from an initial $167 million loan receivable funding capacity. It has a two-year term, with a rate below 3.95% per annum (+BBSW) on a fully drawn basis. This takes its combined warehouse loan asset funding costs to below 5% per annum (+BBSW).

As a comparison, MoneyMe was operating with funding costs of 11.4% per annum in FY 2020.

In addition to this, the company advised that it expects to realise a substantially lower cost of funds following a refinancing from the existing Velocity warehouse on the October or November payment date.

What now?

MoneyMe will now introduce more competitive pricing across its risk based priced Personal Loan and Freestyle products. This is to leverage the reduction in loan funding costs achieved with the establishment of the Westpac facility.

Management believes that these pricing changes will allow the company to further improve its offering of higher loan amounts to lower credit risk consumers. It also expects the changes to power the launch of new products.

Speaking of which, MoneyMe has just launched its PayAnyone product for users of its Freestyle virtual credit accounts.

This new functionality allows MoneyMe customers to pay any bank account in Australia directly using their Freestyle virtual credit account.

"A significant milestone."

MoneyMe's Managing Director and Chief Executive Officer, Clayton Howes, commented: "This major Australian bank partnership is transformative for MoneyMe, paving the way for substantial scale into the future."

"This is a significant milestone that provides a step change in our funding costs, increases origination capacity and allows us to better compete on price. It is an achievement made despite the Covid-19 operating environment and is testament to the business model, the economics and quality of the loan assets and the growth opportunity," he added.

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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