Making rental dreams a reality

27 May 2016
By Thandi Skade for destinyman.com

Meet Andile Nomlala (32) the founder of Deposit4U, a financial services firm that specialises in short-term rental deposit loans for young professionals…

Typically, renting a property requires a fair amount financial planning given the double rental deposit, key and utility deposit and administration fees required from a tenant upfront.

Tallying these costs, most people have to fork out anything from R10 000 upwards and if you’re a graduate starting your first job or internship, the likelihood that you have that kind of cash saved up before you’ve even earned your first pay cheque is very slim.
Noticing a gap in the market for a financial solution geared towards assisting young professionals secure their first apartment, Nomlala piloted his idea among 15 friends, starting with R150 000 savings. Just over a year later, Deposit4U processes around R450 000 in loans a month.

Based on research that shows that, generally speaking, consumers tend to keep up with their monthly loan or credit repayments consistently for the first year before they start defaulting, he offers short-term loans that cover rental deposits and all other associated fees that is payable over 12 months or less, at an interest rate of between 15% and 28%, depending on an applicant’s risk profile.

The loan is paid directly into the landlord or estate agency’s bank account and once you have settled the loan, the deposit money becomes yours when your lease expires or when you decide to move houses.

“Landlords have been abusing young professionals in terms of refunding deposits. We also educate our lenders around their rights as tenants and what the landlords are responsible for. At the end of a lease we will also fight on your behalf to get your money back if a tenant is struggling,” Nomlala says.

He says the main differentiating factor between his product offering – which is managed by Rainfin – and those offered by traditional banks is the fact that applicants don’t require a credit record in order to access a loan and students will be considered for a loan as long as their parents or relatives can sign surety for it.

You also get the option to repay the loan within 48 hours interest free.

“You want to avert the situation where young professionals get into debt early and ultimately get trapped in the cycle with longer-term loans that offer higher interest rates,” he says.

“A loan for this purpose not only makes rental accommodation more accessible, but it also helps a client with cash flow. It’s far easier to pay back a loan in equal monthly instalments over a year than to fork out a lump sum almost equal to one month’s salary.”

Nomlala says approaching Woolworths Non-Executive Chairman Simon Susman to be his mentor was the real turning point in his business as he not only gained valuable insights into running a business, but Susman liked his idea so much that he became an equity investor.

While he describes the process of registering the company as an accredited credit provider as seamless, Nomlala says the most challenging aspect of his line of business is dealing with the risk that first-time credit seekers pose in terms of not being able to verify a lender’s repayment history.

Looking into the future Nomlala is planning to partner with big corporates to organise accommodation for graduates in their internship programmes or those completing articles as well as removal companies to offer a holistic product offering from accommodation searches, financing, moving services and electronics for your home.

“There are a lot of business opportunities for black entrepreneurs, but they are often missed because we overlook the basic, simple things around us. The world is focused on innovation, but innovation doesn’t have to be complicated,” he advises.
Click to read the article on destinyman.com.