Within one year of its launch, BeneFactors, winner of Rwanda’s Seedstars challenge last year has been able to break even catching the attention of several institutional angel investors and private individuals who have put together USD 150 K pre-seed funding to help them improve their internal operations. BeneFactors provides financial access to small businesses in Rwanda who need working capital to sustain growing customer orders. This kind of service is a new financial product that is commonly referred to as factoring.
In an interview with WeeTracker, the CEO of BeneFactors, Olivia Bryanne Zank intimated that “No regulatory framework in Rwanda existed and in no way did we want to get categorised as informal money lenders. We therefore had to work with the National Bank of Rwanda to first get a sandboxing space, and then support them to develop an appropriate licensing and reporting structure which was passed last month. We have been so happy with our engagement with the regulators in Rwanda who fully support what we do and have been extremely forthcoming, which is absolutely crucial for any fintech startup.”
Failure to access working capital is a common cause of business failure. A trader or a small business might have supplied goods or services to a previous client whose delay in payment affects their ability to execute new client orders. This challenge is witnessed across most industries including the agricultural sectors where farmers sell produce to institutions or companies that release payment at fixed times. BeneFactors’ value proposition lies in their ability to tailor working capital solutions that are specific to their clients. According to their website, they provide cash in exchange for unpaid invoices and purchase orders.
Most young businesses in Rwanda that require operational capital or emergency funding are faced with challenges in accessing financing from existing capital providers like banks. Some banks take as long as two months to release cash for those who qualify although most get locked out either due to lack of collateral or if the amount they require is much lower making the requirement for collateral impractical. It would appear that BeneFactors are exposed to risk when they provide cash to traders who might default. To mitigate this, they work with a team of legal experts and advisors that do background checks on the applicants. They generate revenue by charging commissions for the amounts they have advanced. BeneFactors counts Farm to Fork Ltd as well as Trattoria Bar and Restaurant among their regular customers.
“We have completed over 400 deals to date, with zero losses. We currently have 72 active deals. Our model is quite flexible, so we have been able to restructure with a few clients when it turned out that the operating reality was different than we initially expected. This is all part of the learning process, and we see less restructuring amongst the clients we’ve added in this Q3 of 2018 that we did last year,” Olivia added.
This round of pre-seed funding will help BeneFactors to further develop their scoring system as well as grow their portfolio as a necessary requirement before scaling up with their seed round slated for Q2 2019. Winning the Seedstars Challenge roped in Jali Partners and Bag Innovation who added their support. They are in talks with a number of venture capitals as well as various fund owners interested in the Rwandan market.