South Africa’s first online business lender specialising in small to medium enterprises is forging ahead in the financial technology (fintech) space, boasting 65% repeat business in just eight months of operations. By Staff Writer
Next generation lender, Pollen, is the brainchild of Louis du Plessis, who is the CEO of the fintech start-up, backed by Anglo African Group majority owner and chairman, JP du Plessis.
Overseas, the online marketplace where small businesses can secure loans is an enormous industry with tech-orientated companies such as the NYSE-listed OnDeck in the US and Moula in Australia transforming the financial services landscape.
But Pollen is first out of the gate in South Africa in a market it estimates is worth over R189-billion. Anglo African, which has been in the SME financing business since 1996, is the backbone of Pollen.
“The interesting thing is that South Africa was way ahead of the global market in terms of online personal loans – think of Wonga and Capitec, for example, and the credit vetting software developed here – but it has lagged behind when it comes to unsecured business loans to the SME market,” says Louis du Plessis.
With the launch of the innovative fintech company into the market, the stage is now set for a revolution in SME business lending space – a sector traditionally under-served by South African banks.
Fast business loans
The idea behind Pollen is to give entrepreneurs and SME business owners fast business loans via a revolutionary online application and vetting platform.
“Last year, we developed a tech platform to do credit vetting in a short amount of time, and which delivers business loans to SMEs within three days of the application process. I knew there was a vacuum in South Africa for such a business, that it could solve a major issue facing small to medium businesses here,” says Louis.
By the middle of July 2015, Louis had set up the company with Anglo African providing the funding backbone and operational support. The bespoke credit vetting software platform was developed in-house, and adapted and fine-tuned as the company developed.
“We knew the credit risks would be different in South Africa,” Louis says. “We wanted to pilot it for six months, to see average loan size, demand etc. Eight months later we’ve done R100 million worth of loans.
“Not only that, but 65% of this was repeat business, demonstrating the real demand for our product in the SME business sector.”
Substantial market potential
Louis believes the market for online lending could be huge. He says South Africa’s SME sector comprises one million registered companies. .
“It’s a substantial market,” says Louis, adding that Pollen provides loans to small businesses with an annual turnover of R1 million and over, up to medium size companies with a turnover of R50 million. Pollen business loans ranges from R50 000 to R1 500 000.
“The reaction we’ve had has been overwhelming,” he says. “It took us by surprise and it showed how the South African experience is echoing that of the US and Australia. There is a huge need in the South African SME market for what we have to offer.”
Anglo African Group chairman, JP du Plessis, says, “Fintech is a growth industry, and the next generation lenders such as Pollen, OnDeck, Moula and others are filling a gap left open by traditional banks, which have operated in the same way for over 40 years.”
The key is simplicity
Louis emphasises that simplicity is behind the Pollen offering. The website asks potential clients just three questions before they take the next steps of their journey:
- Has the business been in operation for at least a year?
- Does the business have a minimum turnover of R1 000 000 a year?
- Does it have a successful business lease history and is the rent up to date?
“Our focus is on keeping it simple. All business loan information and terms are disclosed upfront. The applicant knows what he or she is paying from the beginning, with a flat 25% on the loan paid off over six months in weekly instalments,” says Louis.
“If you loan R100 000, you repay R125 000. There are no fluctuations; nothing changes with interest rates. It doesn’t matter if you’re a big client or a small one, it’s still 25% − this is the internationally accepted norm. Too often businesses have no other choice than to let excellent opportunities slip through their fingers due to a lack of quick and easy funding. With Pollen there is no need to.”
Louis says in the eight months of its existence, Pollen has made loans to businesses in a variety of sectors from retail and franchises, to manufacturing businesses and the service industry. The business loans have been used for opening new locations, buying equipment for expansion, to do renovations, buying extra stock or using it for advertising stock or buying out a partner.
The challenges
“One of the biggest challenges in the set-up phase we’ve had is dealing with the volumes. We didn’t expect the volumes; they were higher than anticipated. But we had Anglo African’s backbone to help pull in the people we needed. We are now ready and poised to go big – really big,” says Louis.
South Africa desperately needs entrepreneurs to boost the economy and create jobs. However, they often fail when cash flow is temporarily tight or new equipment is needed to expand and banks are reluctant to secure loans for them, Louis believes. This is why fast, short-term funding is a vital component of success for small and medium business owners.
