Brazilian technology-enabled lender focused on small and medium-sized businesses BizCapital is preparing to become a financial institution in 2021, betting on the new regulatory agenda of Brazil’s Central Bank.
The company, which was born in 2016 to provide credit for working capital and the acquisition of equipment for SMEs, now wants to be the main provider of financial solutions for small entrepreneurs, launching several products. A similar strategy to that of Cora and other fintech startups in Brazil now looking to businesses as the next battleground against big banks in the country.
On Tuesday, BizCapital launched a free of charge digital account for small business owners, who will be able to make transactions to customers or third parties without extra costs, besides scheduling payments and using other financial services.
BizCapital’s credit lines will be integrated into the digital account, making the process of granting the loans more agile. But the account is not just for those who have already obtained a loan with the startup. It is available to all small business owners.
With this, the fintech intends to create a “gateway” to offer credit and, over time, other services. BizCapital’s idea is to reach 120,000 account holders by November 2021.
Today, the startup serves 7,700 companies and has made around 10,000 loans through its platform, 6,000 until the beginning of the COVID-19 pandemic. The fintech has 95 employees and 20 open positions, with the ambition of becoming the biggest player in this market in Brasil.
A complement of October’s Series B: BRL 20 million from a Dutch fund
The development of the digital account was one of the products devised by the fintech since it raised a BRL 65 million Series B round in June, led by DEG (Deutsche Investitions – und Entwicklungsgesellschaft), the international investment arm of the German development bank KfW, in conjunction with MELI Fund, corporate Mercado Libre‘s VC fund. In October, BizCapital also raised a BRL 20 million complementary infusion, led by the Dutch fund Oikocredit, totaling BRL 85 million.
In talks with LABS, BizCapital co-founder Francisco Ferreira said that the COVID-19 pandemic had a positive effect on Biz’s business because if at the beginning of the crisis there was a doubt about what would happen with the credits originated via the platform, the question has now been answered: the fintech managed to overcome the economic crisis.
“Not that there has been no increase in defaults, but I think we managed to go through this crisis, showing that what we do is very consistent in terms of the quality of the credit portfolio,” he said.
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According to him, the startup is well-capitalized now, but conversations with investors are “constant” and vary according to the opportunities that arise. “We raise rounds every time we see that we have a good, solid moment, where we see that if we invest, we will bring a financial return,” he said.
For him, having managed to receive this amount during the crisis is related to the fact that the foreign investor is looking at Brazil in the long term and thinking about the structural changes that are happening in the market, which, eventual crises, in the long term horizon, do not change the perspective.
According to Ferreira, over the next 18 months, BizCapital should launch products to solve small companies’ different problems. “In the loan business, you end up having a more ‘episodic’ contact, the company takes one credit, it pays, it takes another credit, it pays. What we want is to be present every day in the life of the company. And all these products, account, card, all this will bring the customer closer to our company over time and strengthen our ecosystem,” he stressed.
According to the company, at BizCapital, the credit falls to the recipient’s account in one business day at the most, which, with Brazil’s instant payment system PIX integrated into the platform, will soon be even faster.
Below are the main excerpts of Francisco Ferreira’s interview with LABS:
LABS – How has the B Series been used?
Ferreira – A part of the money we used in the process to become an SCD (Direct Credit Society, in Portuguese). We have a whole job of adapting for regulatory requirements, and we have been preparing for that. We have to have the minimum capital required by the Central Bank.
Our idea in the first half of next year is to become a financial institution regulated by the Central Bank. We are also developing other products; we have grown the team.
Historically, Biz has always been the most agile platform on the market for small businesses to obtain credit. Now, we are further accelerating this process.
Since May, we have been applying a new fully automated onboarding process, protected against possible frauds. It makes even more checks (than before), and the whole process can be done automatically. This further accelerated the time between the customer accessing our website and obtaining the credit release. We take a selfie of the client, check by artificial intelligence if the photo matches, and then cross-check document information to see if these documents are true.
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It is BizCapital’s technology to check if the person trying to take the loan is part of that company. This is a way for us to make the process faster and be even safer concerning what we have today.
LABS – How will the PIX integration work?
Ferreira – The feature is not yet active. Our idea is to allow the customer to pay Biz’s invoice and loans using PIX. We will also start to pay via PIX. This will allow loans made on the platform to be faster and 24/7. Today we only have operations on weekdays.
It would also reduce costs because PIX is cheaper than the TEDs (a type of bank transfer in Brazil, which is faster because it is done during business hours, but more expensive) we operate with today. Another product in the testing phase is credit with a guarantee of card receivables. That is, companies that accept cards can use these receivables as a guarantee for our loans using the brand’s administrators.
LABS – How are BizCapital’s credit grant fees?
Ferreira – Our rates are very competitive, but our client doesn’t look for us just because the rate is cheap. Often, we don’t even have the cheapest rate. He looks for our service because we have the best experience, it is the fastest service.
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People think a lot about fees, but I think that having a financial partner you can count on is even more important for a small business. Much of our product innovation goes through how we do it the fastest for the customer. Because deep down, there are a series of regulatory requirements to make any financial transaction, and you have to prevent fraud and solve the customer’s problem with a few taps on the cell phone. This is our proposal.
Today, we offer loans from BRL 5,000 to BRL 200,000 with rates ranging from 1.99% per month to 6.49% per month, depending on the company’s credit profile. The payment term varies from 6 to 24 months.
To apply for credit, the company must have a minimum turnover of BRL 120,000 per year and a maximum of BRL 5 million per year. The company must also be at least one year old.
To grant credit, we evaluate companies with different data sources. We created our credit models using over a thousand different variables. Many people ask what the secret to taking credit is. Well, we look at companies that pay taxes, that have a positive cash flow, that already have a credit history in the market, pay employee rights, all of which we look at, in a very automated way, it is true.
But essentially, we weren’t born to be a bank—we want to help the entrepreneur, and we happen to offer financial services.
LABS – How do the new Central Bank regulations affect BizCapital’s business?
Ferreira – When you start in this market and see everything that is being done at the Central Bank, it’s a lot of things: PIX; the entry of the registrar’s convention in February, which will improve the credit market based on card receivables; the book-entry duplicate invoices, which is something to happen mid next year; the open banking regulation that goes live at the beginning of next year; SCDs and SEPs (People’s Loan Society) regulations, which were new cheaper structures to operate under the jurisdiction of the Central Bank; the payment account itself, which I think was a big evolution. It is older but very sophisticated.
When we look forward and see everything that has to happen, I have the feeling that we’re just at the beginning. We haven’t seen even 1% of what’s coming.
