Cash flow is a major issue for African small businesses. Long payment cycles, which can take 30-90 days after services or products are rendered, and a lack of capital, which 85 percent of African small and medium businesses face, are the main causes of cash flow problems.
Many startups are addressing these issues for African SMBs in some way, and the demand for their services has resulted in a significant round of funding for Ghanaian startup Float. The fintech that provides credit lines to businesses has raised $17 million in funding, which it plans to use to expand its offerings and geographically.
The seed round included $7 million in equity and $10 million in debt. While Cauris provided debt financing, Tiger Global and JAM Fund, Tinder co-founder Justin Mateen’s investment firm, co-led the equity portion. Kinfolk, Soma Capital, Ingressive Capital, and Magic Fund are among the other venture capital firms involved in the equity round.
Angel investors included Y Combinator CEO Michael Seibel, Horizon Partners’ Sandy Kory, Ramp founders Karim Atiyeh and Eric Glyman, mPharma’s Gregory Rockson, and Dutchie founders Zach Lipson and Ross Lipson.
CEO Jesse Ghansah founded Swipe with Barima Effah in 2020, and the company, rebranded as Float, went live with its product in June 2021. In 2016, the chief executive had the idea for the YC-backed Ghanaian fintech while working at OMG Digital, a media company he founded that was also backed by YC.
“Because we needed credit, we obtained an overdraft from a long-term partner bank with which we had transacted more than $100,000.” “However, the bank required us to deposit 100% collateral in cash before they would grant the overdraft,” the two-time YC founder told reporters in a June interview.
“I also recall borrowing money from loan sharks at exorbitant interest rates, sometimes as high as 20% per month.”
According to research, more than 51% of Sub-Saharan Africa’s 44 million formal SMBs say they need more finance than they can get to grow their businesses. Float provides credit to some of these businesses that are having difficulty obtaining credit from traditional banks.
Float offers flexible credit lines for businesses to cover cash flow gaps, as well as software tools to manage accounts and wallets in one dashboard, as well as automate bills, vendor or supplier payments, and invoice collections. The company aspires to be Africa’s “financial operating system” for small and medium-sized businesses.
Other platform features include invoice advance, opening a business account, payment links, budget management, and spend cards.
Recently, the company added two new features: revenue advances and instant payouts. With the latter, Float hopes that small businesses will use its platform to access their revenues instantly rather than using gateways, which can take days to settle. Its invoice factoring service enables businesses with outstanding invoices to obtain cash advances.
According to Ghansah, all of these features provide various forms of credit for various industries and verticals across the continent.
“The major challenge is that business credit needs vary greatly.” “The credit needs of a retail business are very different from the credit needs of a services business, or the credit needs of an agriculture, business, pharmaceutical, or medical supplies business,” said the CEO.
“As a result, we’re attempting to delve deeply into which credit products work best for specific verticals.” So far, that’s what we’ve been working on.”
In the seven months since its launch, Float has onboarded hundreds of businesses from a variety of industries, including retail and manufacturing, fintech, e-commerce, media, and health.
In that time, Float has also spent $10 million on credit and made cash advances to businesses. The company claims that its payment transaction volume (invoicing and vendor payments) has increased 26x.
Float isn’t the only African fintech startup that aspires to be the region’s “operating system” for small and medium-sized businesses. Prospa, Brass, and Sparkle are a few of these startups that offer businesses financial and cash flow support as well as software services.