Small businesses play a big role in creating jobs and building the economies of most emerging economies. In Nigeria, small businesses account for 96 per cent of companies, 84 per cent of employment, and 48 per cent of the national GDP. However, one of the major challenges small businesses face in Nigeria is financing.
Currently, there are over 40 million small businesses in Nigeria, and only a few have access to formal financing. This is a significant issue because, without working capital, companies are unable to invest and grow.
Payhippo, one of the leading lending startups that is widening credit access for small businesses in Nigeria, has today announced the close of a $3 million seed funding round to expand its technical team and enhance its lending offerings.
The round was led by influential African fintech founders and financial leaders Ham Serunjogi and Maijid Moujaled, co-founders Chipper Cash, Olugbenga “GB” Agboola, founder Flutterwave, Bolaji Balogun, CEO Chapel Hill Denham, and Hakeem Belo-Osagie, Founder Metis Capital Partners.
Other angel investors include management from Paystack, Brex, and Tala and several LPs from Payhippo’s preseed investors. Institutional investors include TEN13, VentureSouq, and Prodigio Capital.
In July this year, the startup raised a $1 million dollar pre-seed funding after getting accepted into Y-Combinator’s 2021 Summer cohort. At the time, the startup claimed to have disbursed more than 3,000 loans of over $4.1 million since it launched in 2019.
To date, Payhippo has disbursed 5000 loans to small businesses across Nigeria. In September 2021, the company earned $64,000 in revenue from $900K disbursed, experiencing 25% monthly growth with a 97 per cent repayment rate on loans.
Commenting on the investment, Chioma Okotcha, Co-founder and COO of Payhippo said “The funding will allow us to invest in hiring more engineers and data scientists. We aim to improve our technology and enhance our lending offerings as we continue to address the persistent financing gap for small businesses in Nigeria. At Payhippo, our vision is to provide millions of small businesses with sufficient and available capital to run and grow their businesses.”
How PayHippo is extending loans to SMEs
Payhippo was founded in August 2019 by the trio of Zach Bijesse, CEO, Chioma Okotcha, COO, and Uche Nnadi, CTO. Having worked in fintech and lending organisations in Nigeria, the team had the vision to create an innovative lending product for small businesses in Africa. Payhippo provides small businesses with access to credit in less than three hours; with instant financing, business owners can make investments needed for growth.
Most small businesses are creditworthy; however, accessing credit is challenging because they do not have credit scores. Traditional lenders’ collateral requirements are too high. For those businesses that get through the process, it can take up to three months to receive the funds.
Payhippo is driving financial inclusion for small businesses by creating accessibility to financing. A business can apply for a loan through the company’s online platform by providing their business information. Through their backend technology system, the firm uses KYC checks to verify the business’s cash flow data, business owner data, and industry data – all within a few minutes.
In a couple of hours, the company receives its loan. Payhippo provides small businesses with short-term working capital with average loan amounts of $1300 and allows them to use the principal amount during the entire tenor, using the money to run their businesses entirely.
Businesses then repay the whole loan at the end of the loan period. Small companies can then build their Payhippo score based on their track record – by repaying their loans on time, they become eligible for higher amounts of capital.
One of the investors in the round, Ham Serunjogi, Cofounder and CEO of Chipper Cash, while commenting on the funding said “New financial technologies are being developed and implemented changing the competitive landscape in the financial sector in Africa. Access to credit is a critical necessity for small businesses to manage their daily challenges. Payhippo helps address this need through its innovative approach that provides loans to small businesses in less than three hours enabling them to have access to sufficient working capital to grow.”