ImpactAlpha, October 17 – Brazilian fintech firm BizCapital launched operations in January to help Brazil’s small business owners secure capital necessary for the day-to-day and growth needs of their businesses. Quona Capital, a financial tech investment firm that spun out of Accion, has led the company’s R$20 million ($5 million) investment round. Two existing investors, Monashees and Chromo Invest, both based in Brazil, also participated.
Roughly 70% of Brazil’s micro and small business owners are shut out of mainstream bank lending and instead resort to taking personal loans, which can carry interest rates as high as 200%. BizCapital offers short-term loans for up to R$150,000 ($40,000) at annual rates in the mid-double digits. The company hasn’t disclosed the size of its loan book but says it’s received more than 100,000 credit requests and serves customers in all 26 Brazilian states.
BizCapital is an online lender and is one of the few fintech companies using alternative credit scoring models for the small business sector. While fintech firms have proliferated across Brazil’s consumer finance market, few have developed scalable models for small business lending. BizCapital relies on the prevalence of smartphones and mobile data to underwrite and service its customers at a lower cost than traditional lending institutions.
“Small business lending is harder than personal lending,” says Quona’s Jonathan Whittle. “That said, it’s more defensible. The relationship you build with small businesses leads to repeat business with better and better underwriting.”
Quona, which spun out of Accion in 2014 with Accion’s Frontier Investments portfolio, has backed other small business lending ventures. It’s portfolio includes Konfio in Mexico, Yoco in South Africa, and NewGrowth in India. Quona recently re-upped its investment in NeoGrowth in a $47 million round, led by LeapFrog Investments. Quona recently had a first close of $88 million for its third fund, Accion Quona Inclusion Fund LP, reports Deal Street Asia.