FinTechs Offer Fast and Cheap Credit to Entrepreneurs & SMEs in Brazil

Today, in Brazil, we have over 30 FinTech startups offering credit products, according to 2017’s FinTechLab Radar survey. FinTech startups in this segment are attractive because they have lower interest rates. A survey by Sebrae and the Central Bank indicates that the average interest charged by banks for micro-entrepreneurs is 4.5% per month, while FinTech startups similar to Nexoos offer rates ranging from 1.6% to 2.25% per month.

"In general, the client's experience with FinTechs technology is more efficient and less bureaucratic than the banks themselves," noted Ricardo Assaf, President of ABSCM (Brazilian Association of Microcredit Societies). An interesting example to mention here would be Rapidoo, which is able to make the credit release in up to 30 minutes for businesses that bill up to R $200K.

It is important to understand, though, that while the mentioned startups are not financial institutions themselves, they are linked to financial institutions authorized by the Central Bank. "The financial environment is highly regulated. You cannot begin [a FinTech] and then regularize [it]. It either becomes a financial institution or aligns in partnership with one," explained Ricardo Assaf. Therefore, there are FinTech startups that mediate between banks and individual investors, as well as those that are associated with some banks.

Examples of FinTech startups that assist in going through the bureaucratic process of obtaining credit from a financial institution include Capta Money and Avante. Lending startups bridge the gap between companies and investors through peer-to-peer lending, according to FinTech data in the table below.

Notable lending startups in Brazil focused on SMEs

Biva P2P lending startup. Provides loans of up to R $500K. TuTu Digital P2P loan platform that offers credit between R $5K and R $100K. Rapidoo Factoring platform. Kavod Lending P2P lending startup. Will start operations in July and intends to finance R $5 million in 2017 and R $33 million in 2018. Nexoos The peer-to-peer loan platform has financed more than R $9.5 million. Avante A microcredit company that has already lent more than R $70 million to more than 30K microentrepreneurs. Received a contribution of R $38.6 million from Fiinlab and from the investment fund Vox Capital in June. CaptaMoney Mediator between financial institutions and SMEs. It was selected for acceleration by BMG Uptech.

Leandro Zen, CEO of TuTu Digital, explains his P2P proposal, "We have people willing to invest and have returns that are far above the market and can contribute to the social impact we have on this niche of the economy [micro and small businesses], which contributes to almost one-third of GDP, more than half of the formal jobs generated, and there are more than 10 million CNPJs (Corporate Taxpayer Registry)."

Kavod Digital wants to reach more than 35K investors and 2K companies in the next five years, according to its CEO, Fábio Neufeld. The company starts its operating in July. "We have an open investment round of R $500K, and we already have an angel investor who will contribute 60% of the value," said Neufeld.

This content was published in partnership with StartSe, a leading Brazilian website about startups. The portal contains the StartSe Base, the largest database of startups in the country, with more than 5,000 registered companies.