By Ryan Weeks on 24th March 2015
The alternative business funding scene in continental Europe is beginning to bustle with activity and innovation. The direct lending space, which is distinct from the peer-to-peer model, has been quietly building momentum. By direct lending I refer to online providers of credit lines and to merchant cash advancers. In other words, companies that extend credit to individuals and small businesses via an automated, algorithm-based assessment process – a process that typically takes an extremely short amount of time for prospective borrowers to complete.
Somewhat unsurprisingly, the prolific company-factory that is Rocket Internet recently opted to launch a business into the direct lending market – much in the same way that it has backed a pair of peer-to-peer lenders in the form of Lendico and Zencap. Rocket’s latest endeavour is the short-term business loan provider Spotcap. The platform – currently active in both Spain and the Netherlands – is already targeting a global rollout of its services, despite having launched as recently as September 2014. Those services boil down to providing SMEs with an unsecured line of credit, ranging between €500 to €100,000 in size.
I had a chat with Toby Triebel, Co-Founder and CEO of Spotcap, to hear the full story.
Can you give us a brief introduction to the platform?
Spotcap aims to enable small business owners worldwide to grow without having to worry about how to finance their projects. We are a young fintech company that leverages big data to provide financing solutions for small businesses. We went live in September 2014 in Spain and we are now expanding to new markets. We kicked off our global rollout with our launch in the Netherlands earlier this month.
What was the genesis of Spotcap? Tell us about the market opportunity?
I have been working in finance for the past 10 years of my life and witnessed first-hand how banks have been and continue to deleverage their balance sheets globally, thus effectively shrinking their loan portfolios. In 2014, Jens Woloszczak and I co-founded Spotcap, an online lending platform focused on the needs of micro, small and medium sized enterprises.
At Spotcap we are trying to fill a gap in the market by providing loans to micro, small and medium sized enterprises that are underserved by traditional banks. Banks often don’t have the capacity and don’t want to serve these companies because they are too young, too small etc. Spain is a great example, there are more than three million Spanish SMEs, employing 80% of the total private workforce in the country. But these SMEs face tremendous challenges in accessing capital to grow.
At Spotcap we found an opportunity to combine technology and finance to provide loans for small businesses. We do it by offering very competitive lending products, which are extremely fast to get. Users can apply in minutes online, and get their credit line the next day.
How does the platform work from a practical sense? How much can be borrowed, over what terms, and what interest rates are paid? Are borrowers required to provide security?
Businesses can apply for a credit line directly at www.spotcap.es in Spain or www.spotcap.nl in the Netherlands. The credit lines range from € 500 to € 100,000. Spotcap’s algorithm analyses the businesses’ performance and creditworthiness by evaluating the business data of the applicant. Borrowers are not required to provide additional security. On average interest rates are between 1 and 1.5 percent. Ultimately, Spotcap proposes a non-binding offer for a credit line, with the amount and cost based on the company’s scoring.
How are the loans funded?
We secured our first round of debt capital this week and received 5 million euros in funding from Kreos Capital. Accordingly, we’re successively moving to debt as a source of capital to fund our loan book. Beforehand we funded the loans with our own equity.
What is your take on the marketplace lending model? Are you tempted to open up the platform to private investors and/or institutions?
We have chosen to fund our loans with our own capital and not with retail money which is the case for marketplace lenders. We can thus offer our clients more certainty, which we believe is one of our core propositions. Once our clients are approved, they can get the funds within one business day - guaranteed.
Which markets are you currently operating in? Do you have international ambitions?
We’re currently operating in Spain and in the Netherlands and plan to expand to at least three additional markets during 2015. We have ambitious goals at Spotcap and we aim to become the global leader in short-term online loan business.
Where do you see the company in a year's time?
For the past months we have been working very hard on our product. Now we’re ready to focus on our expansion plans and we’re eager to bring Spotcap to new markets. We aim to fulfil our global growth plans to help small businesses grow around the world.