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Chinese Offshore Debt Collection Company Goodfaith Technology Plans to List in the U.S.

On March 30, GoodFaith Technology Inc., a provider of risk management and debt collection solutions in China, submitted an F-1 prospectus to the US Securities and Exchange Commission (SEC), planning to list on the NASDAQ exchange.

Collection service is the mainstay of the company's revenue.

Goodfaith Technology Inc. is a holding company registered in the Cayman Islands, incorporated on May 13, 2021. As a holding company, Goodfaith Technology Inc. has no substantive business, but through its indirectly held wholly-owned subsidiary Suzhou Goodfaith Technology Inc. and its subsidiaries (including Shanghai Beiming Information Technology Co., Ltd., Shanghai Yuyi Information Technology Co., Ltd. Company and Shenzhen Xindesheng Financial Services Co., Ltd.) to carry out all business.

According to the official website, Goodfaith Technology Inc. provides risk management services to commercial banks and non-bank financial institutions. Its product services are divided into pre-loan risk control, post-loan monitoring, and precision marketing. From the perspective of revenue structure, post-loan monitoring, that is, default debt collection services, is the company's revenue pillar.

As of the end of 2021, the company provides services to three of the top ten China domestic commercial banks, namely Ping An Bank, China Merchants Bank, and China Construction Bank, and cooperates with certain enterprises and consumer finance companies under Internet giants. Its clients do not include peer-to-peer lenders.

Goodfaith Technology Inc. stated that the company is currently focused on providing products and services to commercial banks, financial companies affiliated with e-commerce platforms, licensed consumer finance companies, and other financial institutions engaged in consumer credit business in China, excluding P2P lending institutions. Unlike traditional asset management companies, the company's overdue debt collection business follows an "asset-light strategy"; it does not purchase overdue loans for collection but only collects on behalf of financial institution customers and charges commissions for this. An "asset-light strategy" reduces a company's cost of capital and cash flow requirements by avoiding debt acquisitions while minimizing exposure to potential bad debts.

$13.8 million to be raised

Goodfaith Technology Inc. estimates that if the initial public offering price is assumed to be $5 per share, the net proceeds from the issuance of 3 million shares will be approximately $13.8 million (if the underwriters exercise the over-allotment option in full, the net proceeds will be approximately $15.87 million). 10% of the funds raised by the company will be used to establish more wholly-owned subsidiaries and operation centers to expand the customer base; 20% will be invested in technology development, including updating IT and service systems, and expanding products and services; 30% will be used for business expansion and growth; 10% for recruiting new talent; and the remainder for operations and other general corporate purposes.

Collection efficiency is high

According to the prospectus, in 2019, 2020, and 2021, Goodfaith Technology Inc.'s post-loan department successfully recovered the total non-performing credit loan debt of approximately 320 million yuan, 5.27 billion yuan (a year-on-year increase of 1534%) and 11.03 billion yuan. (YoY growth of 109%). In the first half of 2022, the total collection amount is about 7.4 billion yuan, an increase of 85% over the same period in 2021. This also allows its revenue to increase by 182.6% in the first half of 2022 compared to 2021.

In recent years, China's credit loan debt collection industry has been expanding. According to Frost & Sullivan, the market size of credit loan debt collection services reached approximately RMB 65.8 billion in 2020, and is expected to reach approximately RMB 116 billion by 2025.


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