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Online financing platform offers R1bn SME funding

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Fundrr co-founders Idan Jaan (CEO) and Jarred Noche (CFO).
Fundrr co-founders Idan Jaan (CEO) and Jarred Noche (CFO).

Johannesburg-headquartered fintech firm Fundrr aims to disrupt the local small and medium enterprise (SME) financing market, offering R1 billion worth of funding to local businesses online.

Founded by entrepreneur Idan Jaan (CEO) and chartered accountant Jarred Noche (CFO) in June 2018, the online funding platform uses an automated credit model that analyses close to 100 data points to provide a more complete picture of a small business and its growth possibilities.

This produces a Fundrr score, and on this basis, the start-up is able to provide loans from R20 000 to R500 000 to applicants.

Jaan previously worked for a company which had 80 SMEs in its portfolio; however, he explains hardly any of them were able to access bank funding. “Those that applied for funding would wait 12 weeks for a decision, they had mountains of bureaucracy to get through, and even alternative lenders couldn’t help.

“It also took too long for a decision and funding was too expensive to be viable,” he adds.

Fundrr uses technological innovation and automated algorithms to provide quick and efficient loans to small businesses.

The fintech says since inception it has offered loans to 70% of businesses that have applied.

It funds South African businesses that have at least a 12-month track record, with a minimum of R1 million turnover or asset value.

Through its paperless application process, the company has funded B2B and B2C businesses across all industries, including in food, retail, tourism, manufacturing, supermarkets, automotive, medical, health, beauty, accounting, entertainment, childcare and construction.

Funding is typically used to buy stock, open new stores, purchase equipment, undertake renovations or expand the business.

There are 2.4 million SMEs in South Africa that employ around 60% to 70% of the working population, but this market experiences a dearth of funding, causing a R86 billion credit gap for small businesses, notes Fundrr.

The fintech itself attracted substantial funding from an angel investor and has opened offices in Johannesburg and Cape Town. Its board has a combined 40 years of tech and credit experience.

The R1 billion worth of funding will be allocated to deserving SMEs over a period of five years.

The application and on-boarding are completed online in under eight minutes and responses are provided within 24 hours, notes Fundrr.

Noche believes many local SMEs are underserved, hence they close within three years, due to lack of funding. “Banks have no idea how to underwrite a small business because they use traditional sources of information which don’t give a true picture of the state of the business.

“For instance, they expect small businesses to have audited financial statements, yet many SMEs have no need for audited financials and can’t afford them.”

The start-up has developed various underwriting models for different industries with different cash flows and operational patterns, so the repayment of loans is also individually tailored, notes Jaan.

“We analyse the cash flow patterns of the business. On this basis, we recommend a suitable payment structure, collecting repayments daily, weekly, bi-monthly or monthly over a three- to12-month repayment period.”

Rates of interest vary, depending on the strength of the businesses. Lower risk companies can expect to pay lower rates, unlike competitors that charge a flat interest rate irrespective of the risk, says Fundrr.

“In addition, Fundrr does not penalise entrepreneurs for early repayment; in fact, the transparent and flexible model offers an early repayment incentive and specifies the amount of the loan, the duration and the total amount to be repaid,” concludes Jaan.

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