Fintech lender Investmint links small firms looking for funding, with investor

Chris Bruchhausen and Gareth Price are behind one of SA’s latest fintech lenders, Investmint — which links investors with small businesses looking for finance.

Every month in South Africa seems to yield a new fintech platform looking to offer finance to small businesses, joining the likes of LulaLend and Merchant Capital (see this story).

Price, a chartered accountant who runs a Cape Town accounting practice, and Bruchhausen, a Business Science (BSc) graduate from UCT, launched the platform in June after spending R320 000 over 11 months to develop it.

Chris Bruchhausen and Gareth Price have invested R320k of their own money in Investmint

The platform offers businesses with an annual turnover of at least R1-million, the ability to source finance from lenders, via invoice factoring and bridging loans. Investors who have signed up to the platform act as lenders.

R3m to 14 businesses

Thus far 14 businesses, all based in Cape Town, have received a collective R3-million in finance via the platform. Typically each transaction involves between one and four lenders who together lend out between R20 000 and R60 000 to a business, usually with the business’s invoice used as security.

Bruchhausen says a business can be based anywhere in South Africa to qualify for funding. In addition to having an annual revenue of at least R1-million, to access funding businesses need to have a cloud accounting package (such as Sage Online or Xero). This allows the platform to carry out a due diligence remotely, of each business looking for finance.

The funder isn’t targeting a certain demographic of business, and any small business can apply. The 14 that have so far been funded include a gin maker, clothing manufacturer and wholesale bicycle retailer.

There’s also no limit to the size of finance one can apply for — it’s up to lenders to decide what to lend out, he says.

But Bruchhausen admits that the finance doesn’t come cheap — the platform charges borrowers interest rates of between 3.7% and 7% a month (44.4% to 84% a year) depending on how timely their repayments are made.

Yet he says these rates are lower than what other local fintechs charge small businesses.

He adds that while banks are either not financing small businesses or are slow to approve funding when they do, his platform is filling a gap as loans can be approved within three to 15 minutes.

Platform takes cut of interest charged

The platform now boasts 32 investors who range from a 60-year-old asset manager to a data scientist. One needs to be South African and have a SA bank account to qualify to be listed on the platform as an investor.

The investment is made via a holding account in the platform’s name and the platform then collects on the invoice and distributes the capital with interest (minus a fee the platform charges) to each lender, when the business owner’s client has paid the invoice.

The platform typically takes between about two thirds to half of the interest rate fee that would have gone to an investor, depending on the cumulative amount an investor has invested.

For example, for investor who has lent out cumulatively no more than R1-million, the platform takes 63% of the interest rate fee that such an investor would have received from lending to a business. When this figure reaches R1-million, the platform takes a lower 53% fee and when it exceeds R2-million, the platform’s fees fall to 47% of the interest rate fee.

Bruchhausen stresses the platform complies with all the necessary regulations. “We spent a significant amount on lawyers fees on complying with regulation,” he adds.

He says to tackle the current imbalance between the number of lenders and borrowers, the startup will launch an affiliate programme for accountancy firms in the next two months or so, in a bid to attract more small businesses looking for finance.

Read more: It’s like Standard Bank has almost outsourced SME credit book to us – Merchant Capital founder [Updated]
Read more: Five SA fintechs that service the growing market of SME lending [Updated]
Read more: LulaLend looking to access R500m in debt funding following latest raise [Q&A]

*Correction: In the initial version of this article we referred to Sage and Pastel as examples of cloud accounting package, when these are in fact traditional accounting packages. We’ve changed this to read “Sage Online and Xero”.

Featured image (from left to right): Investmint founders Gareth Price and Chris Bruchhausen (Supplied)