Cape Town's own Lulalend has just secured Series A funding for its start up. Founded by Neil Welman (left) and Trevor Gosling (right), the $6.5 million funding is co-led by IFC and Quona Capital to further their ability to provide short-term loans to small and medium sized businesses that are often unable to obtain working capital. They are the first and only automated short-term business funding solution in SA.
Started in 2014, Lulalend is definitely built for the future in mind. It uses an online application process and internal credit metrics to provide these small to medium business with loans that can be paid in 6 to 12 months, requiring monthly payments of 1/6th or 1/12th of the total loan with monthly costs of 2% to 6%. Loan amounts range from R20k all the way to R1 Million, with the most common loan being about R150 000.
A high percentage of Lulalend’s approvals are processed automatically, using the company’s proprietary credit scoring tech to evaluate and process. This allows business owners to receive funding approval within hours of applying! “When we set up the company the biggest piece within the automation that we’ve had to solve for is the underwriting component and ability to score companies,” Gosling said.
Having last received funding in 2016, Lulalend will use its latest funding to build its tech and data team and improve its ability to reach more small and medium businesses in South Africa. Businesses can apply online and need a bank account to receive a loan disbursement.
Lulalend sees traditional bank loans to businesses as too manual and labour intensive, as they require traditional due diligence and collateral. According to Lulalend, booking small loans through traditional banks doesn’t make economic sense.
Co-founder Gosling highlights the need for startups like his in SA. He states that there is a whopping $23 Billion financing gap for South Africa’s small to medium businesses, which is estimated to contribute 34% to our GDP. “The biggest thing is strengthening our balance sheet so we can access traditional debt funding to grow our loan book,” Gosling told technological and startup news site TechCrunch.