LulaLend looking to access R500m in debt funding following latest raise [Q&A]

SA fintech startup Lulalend has had access to over R150-million in debt funding since launching in 2014 and is on track to access another R500-million off the back of the startup’s latest equity raise of $6.5-million (R92-million), announced last week. So, says CEO and co-founder Trevor Gosling.

The startup — which provides short-term loans to small businesses via an online platform (it typically lends out R150 000 over a six-month term period — raised the $6.5-million in a Series-A round led by the World Bank’s IFC and Quona Capital (see this story).

In a Q&A with Ventureburn yesterday by email, Gosling reported that the business is “performing very well”. “We’ve grown over 200% year-on-year having funded thousands of businesses to date,” he said.

SA fintech startup LulaLend is looking to access R500-million in debt funding following its latest equity raise

He also revealed that the business is looking for more companies and organisations to partner with and provided a picture of the typical business owner who turns to LulaLend for finance.

Here’s what he had to say:

How is the business performing at present?

Business is performing very well. We’ve grown over 200% year-on-year having funded thousands of businesses to date.

What is the repayment rate like?

Performance of our loan book is strong and we’ve maintained write-off’s below four percent for the past financial year.

How does LulaLend’s cost of capital compare to that of other traditional competitors?

We are well priced with regards to the options available to customers and important to note that our funding is unsecured and unrestricted which means it’s completely flexible for our business owners.

Also good to note that the problem with other lenders is that:

• They don’t properly understand SME’s, including being able to assess their risk and lending requirements
• They take a very long to assess an applicant and have low approval rates
• They want collateral in most instances
• Their products aren’t flexible

We’re different and through our digital, data-centric and automated offering we are able to improve on all of these factors which benefits our customers and helps them grow and succeed.

In terms of our cost of capital/debt – it’s not something we can compete with a bank on and their cost of capital will always be lower but at the same time, with our business having matured over the last few years we’ve recently been able to attract a lower cost of funding.

What kind of small businesses are your typical clients?

We fund any type of small business across any industry (outside of our exclusion list relating to gambling, firearms). What this has resulted in is us not having any real dominance in terms of size of business, age of business etc as it’s pretty widely spread.

In terms of industry our biggest exposure is to online and offline retail, manufacturing, professional and business services, construction and logistics.

Our biggest exposure in terms of region is to Gauteng followed by the Western Cape and then KwaZulu-Natal.

The businesses we’ve funded employ anything from one to over 100 employees and can be earning revenues of R40 000 per month to over R10-million per month.

TechCrunch last week reported that the startup is aiming to build a $100-million loan book. What is the size of the loan book at present?

Unfortunately, I can’t disclose our current loan book size

How much debt finance have you raised so far?

We’ve raised access to over R150-million in debt funding to date and are on track to raise another R500-million off the back of this equity raise to help drive increased SME growth.

Are you partnering with any companies or organisations?

Partnerships are an important part of our business and a focus of this equity raise is to invest resource into developing existing and new partnerships.

We have exciting partnerships with a number of businesses including the likes of Payfast (where we fund their merchants) and Takealot (where we fund their marketplace sellers).

We utilise both Payfast and Takealot data in our credit modelling. We are in discussions with (and looking for additional discussions with) sizeable partners that are looking to leverage our technology to fund their SME base.

Featured image: LulaLend CEO and co-founder Trevor Gosling (Supplied)

Read more: SA fintech LulaLend raises $6.5m from the IFC, Quona Capital
Read more: SME failure rate set to spike unless funding is addressed – LulaLend survey
Read more: LulaLend raises new round of funding from Accion Venture Lab
Read more: LulaLend is a true fintech company mixing tech and finance
Read more: A Day in the Life of: LulaLend startup CEO Trevor Gosling [Native Article]