Mortgage broking group Refund Home Loans has been placed in administration, but several buyers are considering acquiring the business which has more than 350 franchisees and a substantial stake in the growing alternative home loan market.
The announcement comes just 18 months after the Australian Competition and Consumer Commission slammed the company and Ormond, after he admitted making false and misleading statements to franchisees about an agreement with the ACCC itself.
It also comes just two weeks after BRW again named Ormond as one of the wealthiest people under 40 in Australia, with his fortune rising $5 million to $33 million.
Ormond was contacted by SmartCompany this morning, but declined to comment.
However, a company spokesperson said the company had endured “a difficult 12 to 18 months”.
“Banks have been tightening up their lending to small business, and that’s just the reality of the situation. They’ve made it particularly hard,” the spokesperson said.
“The company is effectively under-funded, and we have director responsibilities. So there, the banks had no choice but to put in a voluntary administration.”
Refund has suffered since the beginning of the year, especially in Queensland, where the property sector has suffered due to the January floods.
However, the spokesperson confirmed that four buyers are current involved and franchisees – who are still operating – are also looking at purchasing the business.
The company hopes to use the company’s strong brand as leverage, along with its scope – the company has a loan book worth $2 billion.
While the company does have $2.5 million in debt, the spokesperson says this is “a small amount of debt considering the company’s valuation”.
It is understood the administration does not affect either the real estate or financial planning divisions of the business. A sale process is currently underway, led by administrators SV Partners.
It is unknown whether competitors are eyeing a stake in the company, although the company’s substantial franchisee footprint would be very attractive to a number of existing players.
Two other businesses operated by Ormond, Refund Real Estate or Refund Financial Planning, are not in administration and are unaffected.
Ormond launched Refund back in 2003, after working in the banking finance industry. The company’s model is based on providing a refund of any commission it receives from lenders.
The business has experienced substantial growth over the past few years, with its franchisees growing to more than 350, carving out a significant portion of the growing market for mortgage products sourced from outside the big four banks.
Refund appeared in the Smart50 list of Australia’s fastest growing SMEs during both 2008 and 2009, ranked as sixth and 43rd, respectively.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
