Riyadh-based fintech Lendo has raised $7.2 million in a Series A round led by Saudi’s Derayah Ventures, it announced in a statement today to MENAbytes. The equity-only round also includes participation of Seedra Ventures, Shorooq Partners, 500 Startups, and Impact46.
Founded in 2019 by Osama AlRaee and Mohammad Jawabri, Lendo offers instant invoice financing to SMEs through its Shariah-complaint lending marketplace. The offering helps SMEs with their immediate cash requirements. Invoice financing is a popular short-term borrowing tool for businesses in different markets around the world where they use their receivables to get loans from banks (or other financial institutions) but there are hardly any banks that offer it in the region.
Lendo offers loans starting from SAR 100,000 (about $27,000) and going up to SAR 3 million ($800,000) by connecting the SMEs with investors on its marketplace through crowdlending (aka peer-to-peer lending). The SMEs looking for financing can apply on Lendo’s platform if they have a valid Saudi business license (commercial registration), have been in operations for at least one year, and have an annual turnover of SAR 2 million ($530,000) at least.
The startup takes up to three days to review the profile after receiving all the required details and documentation. If approved, the business can apply for financing of up to 80 percent of the invoice value sold to the customer. These opportunities are then shared on Lendo’s platform with the investors who finance them collectively. Lendo claims that on average it takes about half an hour for an opportunity on its platform to close (i.e. raise the money needed).
The investments start from SAR 1,000 (about $270) and can be made by any Saudi citizen or resident over the age of 18 who has a valid ID and a bank account. The expected annual profits range from 9 to 24 percent depending on the risk profile of the SME. All the opportunities listed on Lendo receive a risk rating based on its credit history, financial position, owners’ personal credit history and experience, and invoice strength.
“We provide solutions to two major pain points in the SME finance market. First, the limited options for SME businesses to borrow cash quickly and easily and second, the limited short-term options that offer higher returns for investors/lenders,” said the startup in a statement.
Lendo makes money by charging the SMEs with a management fee and taking a 20 percent cut from the profit investors make.
Launched just last year, Lendo claims to have financed over 100 invoices worth over SAR 60 million for SMEs and given more than SAR 3 million in profits to its investors. Its co-founder and CEO Osama AlRaee told MENAbytes that they currently have a default rate of zero.
In a statement, commenting on the occasion, he said, “We are proud to be backed by leading investors who have excellent knowledge and experience in the most rapidly maturing MENA entrepreneurial ecosystem. Aside from the financial support and expert advice from the pioneers in the market, their trust in our business model will help us achieve both our short term and long-term goals and scale our business to the next level.”
“The additional investment helped us create more opportunities for Lendo to finance businesses during the challenging economic climate brought about by Covid-19. Our strategy is to provide access to low-profit rate financing to SMEs and help funders receive better returns. Our alternative form of financing has proven to be faster in getting the needed cash flow and has become an essential part of the recovery strategies for many of our customers/clients. We are proud to be the preferred platform of choice for SMEs lending and borrowing in Saudi Arabia and look forward to being pioneers in the wider MENA region,” he added.
Mohammad Jawabri, the co-founder and COO of Lendo, said, “As a team of fintech experts, we combine financial expertise with advanced technology to bring our clients solutions that can turn waiting time into a valuable win-win situation for all parties involved. During the pandemic, there was a huge surge in the numbers of SMEs who turned to Lendo for financing to keep their businesses afloat. Our 25% month-on-month growth is a testimony of the hard work, dedication, and commitment of our team.”
The startup, for now, is looking to expand into Saudi to serve Jeddah and Eastern Region before it launches in other parts of the region. It is also looking to introduce new products to help SMEs raise working capital. The SME lending landscape in Saudi also includes players like Raqamyah (which raised $2.3 million just last month – and interestingly the round was led by Impact46, a firm that has also participated in Lendo’s funding round), Forus, and Dubai-headquartered Beehive. Lendo is one of the many lending startups that are part of Saudi Central Bank’s regulatory sandbox.
Faris Alrashed from Derayah Ventures, said, “The Lendo team has built a remarkable company which is evidenced by their performance especially during the initial months of Covid-19. Lendo is a powerful solution in the industry and its offering is well-timed with the rapidly increasing demand for financing solutions in the dynamic SME lending arena. We firmly believe in the founders and their unparalleled focus on execution, user experience, and scale.”
Shane Shin, the Founding Partner of Shorooq Partners, said, “As the only new investor to join Lendo’s journey, we are humbled and excited to work closely with Osama, Mohammed and the Lendo team to propel their growth within Saudi as they become the dominant regional player.”