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A statement by Fincheck earlier today claimed that the transaction makes Fincheck the country’s biggest financial comparison site as well as the biggest lead aggregator having signed on 71 banks, lenders and insurers.
FundingHub helps refer South African small businesses looking for finance to 30 alternative lenders and banks.
Neither Fincheck CEO Michael Bowren (pictured above) nor FundingHub co-founder Marilynn Leonard — who is from Xpertek Group, the company that founded FundingHub two years ago — would disclose the value of the transaction or size of the stake that Fincheck has taken.
However, Leonard was able to say that based on agreed milestones it reaches, Fincheck will be able to increase its stake in FundingHub.
Fincheck’s investment in FundingHub is the second investment the platform has concluded since its launch in 2017
She said currently four people work for the platform.
Leonard said the Xpertek Group, a holding company with a portfolio of five software companies, was founded in 2003 to offer payment switching as well as lending systems to lenders to manage their loans books.
Leonard explained that it was from this that the idea for FundingHub had come about.
She said it made sense to work with Fincheck — which was founded by Bowren and Chris Ball in 2016 — as the two platforms’ offerings complement one another.
She said FundingHub was initially funded by a private investor, Paul Kent. She however declined to say how much or what stake Kent had taken in the company.
Bowen, who said Fincheck has seven employees at present, told Ventureburn that his company took over managing the platform last month.
The management of the platform forms part of the deal and is not in exchange for additional management fees from FundingHub’s main shareholders the Xpertek Group, he stressed.
He said the deal came about after the growth of Fincheck’s personal finance comparison, when the two were looking to partner with a platform that helps refer business owners to funders.
“Fincheck had grown and done quite well so it was a natural conversation,” he added.
Fincheck will continue to offer its core offering — which allows consumers to get various personal finance comparisons — via MyFincheck.
‘Average loans sizes of R300 000’
In an earlier press release Fincheck’s Bowren said FundingHub had attracted average loan sizes of R300 000, with the largest loan being R72-million.
He said FundingHub allows small businesses to apply in under six minutes for business finance, comparing multiple accredited finance providers and to make the most appropriate choice based on their business needs.
“There are many different forms of finance available to SMEs. This makes it difficult for them to choose which lender is best suited to their business needs.
“For instance, a business may not know whether it needs equipment finance, unsecured or secured term loans, overdrafts, lines of credit, debtor finance, merchant cash advances or credit cards,” he said.
Small businesses that apply for funding on FundingHub need to have been in business for a minimum of 12 months and need to have an annual turnover of at least R1-million.
Once the small business completes the application, one of FundingHub’s lenders will make an offer. The small business is able to apply to more than one lender and select the most suitable.
Three percent commission from financiers
Bowen told Ventureburn that FundingHub takes a commission of three percent on the value of each loan from each financier that gets a referral through the platform.
However, he stressed that the inclusion of the commission fee does not necessarily mean the finance is then priced to take this into consideration — by the financier for example recouping the cost of the commission paid by charging higher interest rates. Commission payments could come from the marketing budget of each financier, he said.
While he agreed that the finance offered by alternative lenders via FundingHub is typically more expensive than what banks generally charge, he said this is dependent on the sector that a small business client operates in.
While funders such as fintechs and others that provide alternative finance may have helped increase the options small businesses can tap to access finance, banks are still able to provide finance far more affordably.
The answer may then lie in expanding the offering to more banks. Currently FundingHub has signed up only Investec Bank and Nedbank.
Bowren agreed that this is something that the platform is considering. “We’d like to get all the banks on board,” he added.
Until this happens, SA financiers may carry on creaming it from small businesses.