Small businesses in Africa struggle with cash flow. 85% of African small and medium businesses are subject to cash flow issues because of long payment cycles and little or no capital.
The demand for their services has led to a significant round of funding for the Ghanaian startup Float. The fintech which provides credit lines for businesses has raised $17 million and will use it to bolster its offerings and expand geographically.
The seed round had a mix of equity and debt. Tiger Global and JAM Fund co-led the equity bit while Cauris provided debt financing. The equity round has several VC firms involved.
A couple of angel investors also took part.
The company went live with its product in June of 2021. The idea for the YC-backed Ghanaian fintech came during the chief executive's time at OMG Digital, a media company he founded that also got into YC.
We had transacted more than $100,000 at a long-term partner bank and needed credit, so we got an overdraft from a long-term partner bank. The bank wanted us to deposit 100% of our assets in cash before they would give us an overdraft, according to the two-time YC founder.
I used to take money from loan sharks with high interest rates to meet payroll. That made me want to solve those problems with Float.
It is the same problem for more than half of the 44 million small and medium-sized businesses in Africa who say they need more finance than they can get. Some businesses find it difficult to get credit from traditional banks.
In addition to flexible credit lines for businesses to cover cash flow gaps, Float also has software tools for businesses to manage accounts and wallet in one dashboard, as well as automate bills, vendor or supplier payments and invoice collections. The company wants to serve as the financial operating system for Africa's small and medium businesses.
Invoices can be advanced, opening a business account, payment links, managing budgets and spend cards are some of the features on the platform.
Revenue advances and instant payouts are new features that the company has introduced recently. Float wants small businesses to use its platform to tap into their revenues instantly instead of using gateways which take days to settle. Businesses with outstanding invoices can get cash advances with invoice factoring.
The features provide different forms of credit for different industries.
Credit needs of businesses are different. The chief executive said that the credit needs of retail are different from the credit needs of a services business, or the credit needs of agriculture, business or pharmaceutical or medical supplies businesses.
We are trying to understand which credit products work for certain industries. We have been working on that so far.
The cash flow management and spend platform has onboarded hundreds of businesses in a wide range of industries since it was launched seven months ago.
In that time, Float has hit $10 million in credit spend and cash advances. The company claims to have seen its payment transaction volume increase 26x.
Float wants to give African SMBs a way to get money.
The operating system for small and medium businesses in the region is being developed by Float. Financial and cash flow support and software services are provided by some of the startups.
The market is big enough for all parties to coexist, so each company claims not to see the others as competition. There is a feeling of superiority in their products.
Float gives businesses access to financial and software services at the same time. Flexible and short duration working capital is readily available.
The flexibility of our credit is a part of how we differentiate ourselves. It is flexible in that you can take it out for a day and then repay it the next day.
The capital will be used to set up entities in Africa by the second quarter of 2015, according to the call.
The company will use the investment to improve its cash management platform and launch new credit products tailored to specific business industries.
The chief executive said thatFloat 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.
We will continue to refine our credit and software products to deliver the best experiences for our fast-growing customer base. We are excited to help businesses grow in Africa.