There are at least 44 million formal SMBs in Africa. 71% of them require more finance to grow their businesses than they can currently access. However, obtaining credit isn’t easy and for most, it’s impossible as traditional banks prefer to focus on large corporations.
To solve this problem, Float, a Ghanaian fintech startup that provides credit lines for businesses, has raised $17 million in seed funding to provide fast and flexible working capital for businesses to grow.
The seed round was a mix of $7 million equity and $10 million debt. While Cauris provided debt financing, Tiger Global and JAM Fund, the investment firm of Tinder co-founder Justin Mateen co-led the equity bit. Other VC firms involved in the equity round include Kinfolk, Soma Capital, Ingressive Capital, and Magic Fund.
A couple of angel investors also took part including Y Combinator’s CEO, Michael Seibel, Sandy Kory of Horizon Partners, Ramp founders Karim Atiyeh and Eric Glyman, Gregory Rockson of mPharma, and Dutchie founders Zach Lipson and Ross Lipson.
Float, present in Ghana and Nigeria, intends to use this new capital to set up offices in Kenya and South Africa by Q2 as soon as it gets licenses to operate.
The startup will also use this latest investment to improve its cash management platform and launch new credit products tailored to specific business verticals and industries.
How Float provides flexible credit for African Businesses
Founded as Swipe in 2020 (before rebranding to Float) by Jesse Ghansah and Barimah Effah, the YC backed startup launched its fintech product in June 2021. In addition to flexible credit lines for businesses to cover cash flow gaps, Float also has software tools for businesses to manage accounts and wallets in one dashboard, as well as automate bills, vendor or supplier payments, and invoice collections.
In the seven months since Float’s launch, the cash flow management and spend platform has onboarded hundreds of businesses in a wide range of industries — retail and manufacturing, fintech, e-commerce, media, and health.
The company has also introduced some more features recently: revenue advances and instant payouts. With the latter, Float wants small businesses to use its platform to tap into their revenues instantly instead of using gateways, which take days to settle. Its invoice factoring helps businesses with outstanding invoices get cash advances.
Other features on the platform include invoice advance, opening a business account, payment links, managing budgets, and spending cards. Ghansah stated all these features provide different forms of credit for various industries and verticals across the continent.
“The big challenge is that credit needs of businesses are very different. The credit needs of retail are very different from the credit needs of a services business, or the credit needs of agriculture, business or pharmaceutical or medical supplies businesses,” said the chief executive.
“So we are trying to dig deep into which credit products work for certain verticals. And so that’s what we’ve been working on so far.”
Float prides itself on giving businesses access to financial and software services simultaneously. And then in providing readily available flexible and short duration working capital instead of outright expensive loans. The startup aims to serve as the “financial operating system” for Africa’s small and medium businesses.
“Float set out on a mission to provide more cash flow and liquidity for millions of businesses across the continent to help them grow and reach their true potential,” said the chief executive in a statement.
“With this new funding, we will continue to refine both our credit and software products to deliver the best experiences for our fast-growing customer base. We are excited to be the growth partner of choice for businesses in Africa.”