Payhippo, the artificial intelligence (AI)-driven lending platform, has raised $1 million in pre-seed funding, which it plans to use to hire more engineers and keep financing smaller businesses, a Friday (July 2) press release said.
The round was led by African tech investors such as Ventures Platform, Future Africa, Launch Africa and Sherpa Ventures with participation from international investors, Hustle Fund and Mercy Corps Ventures.
The news comes as smaller businesses in Africa still aren’t quite served well by commercial banks. In Nigeria, many are still working in the “informal economy,” which is made up of small to medium-sized businesses (SMBs), and these businesses haven’t been able to get financial services from bigger companies.
According to stats from the press release, two-thirds of the economy of that region makes up the “informal economy.”
Those business opportunities have created more work than the formal sector, the release noted.
But despite that, some smaller businesses still haven’t been able to get ahead in terms of accessing bigger-name services, even despite being creditworthy. The release noted that they often can’t get regular banks to lend to them because they lack credit scores and too-high collateral requirements. Much small-business credit lending ends up being cash-based, which makes it harder for them to put together a credit footprint, and record-keeping being so poor hasn’t helped, either.
Payhippo has worked with automated technology to help work with its customers, allowing Payhippo to grant loans quickly and then spend lender capital efficiently. Small businesses can sign up for the platform — then the company looks into its cash flow and business data, using that to determine what kind of loan is best for them.
PYMNTS recently wrote that with both supply and demand doing well, the state of small business lending has focused on new ways of funding — especially as government aid funded to counter the COVID-19 pandemic runs out. According to Sam Graziano, CEO of Linear Financial Technologies, the problem comes down to too much caution among lenders, even as things return to pre-COVID levels. He said small businesses, though, are likely to be more ready to use digital means because it worked with things like the Paycheck Protection Program (PPP).