The Cape Town-based startup uses an online application process and internal credit metrics to provide short-term loans to small and medium-sized businesses that are often unable to obtain working capital.
Lulalend will use the round to build its tech and data team and improve its ability to reach more SMEs in South Africa, according to CEO Trevor Gosling—who co-founded the startup in 2014 with Neil Welman.
“The biggest thing is strengthening our balance sheet so we can access traditional debt funding to grow our loan book,” Gosling.
Lulalend’s loan sizes range from around $1500 up to $70,000, for 6 to 12-month tenors, requiring monthly payments of one-sixth or one-twelfth the total loan with monthly costs of 2 to 6 percent.
The most common loan is around $10,000 over a 6-month term for a cost over the principal of roughly $1700, according to Gosling.
SMEs can apply online and need a bank account to receive a loan disbursement. A high percentage of Lulalend’s approvals are processed automatically—without requiring manual due diligence—using the company’s proprietary credit scoring tech.
As part of the $6.5 million Series A, investor Quona Capital will join LulaLend’s board.
On why the fund invested in the startup, “We believe Lulalend’s tech-enabled scoring, combined with their ability to provide funding in a quick and transparent way, has the potential to…catalyze SME growth in South Africa,” said Quona Capital Partner Johan Bosini.
LulaLend co-founder Trevor Gosling said the startup could consider expansion in the future but will remain focused on South Africa for now.
On long-term performance goals for the startup, he named generating revenue and lending volume as the primary target. “What we’re trying to achieve is building a $100 million loan book as quickly as possible and that’s what this raise is assisting us with,” he said.
“We believe if you build quality business opportunities will present themselves, whether it’s through a strategic partnership or an IPO or whatever makes sense at that time.”
Gosling said Lulalend is also keeping its door opened to partnerships with big banks or telcos to provide access to finance to greater numbers of South Africa’s SMEs.