Startup Series: Lendo – Serving SMEs Invoice Financing
By Shane Shin, Founding Partner, Shorooq Partners
When Mahmoud Adi and I co-founded Shorooq Partners six years ago, we rolled up our sleeves and visited many banks to fund our mission. Given our short period of operations at the time, we were shut down ruthlessly and learned from personal experience just how challenging it is for an early-stage startup to raise funds through traditional means via financial institutions. Of course, our mission as investors have been nothing but rewarding over the years as we sought out the rare, industry-shaping companies to push the world forward, valuing fundamentals over immediate financial performance of a business as a marker of its success and potential. However, that is not to say that we can overlook the value of stable cash flows altogether.
Collecting on outstanding receivables can make or break a small business, and we understand what a month or a few weeks’ time can mean for a startup, especially in difficult times like this when investors have become more critical than normal – hence, we cherish and empathize strongly with the mission of one of our portfolio companies, Lendo, that specializes in invoice financing for small and medium-sized businesses in Saudi Arabia.
Osama AlRaee and Mohammad Jawabri, Lendo Co-Founders
Saudi’s leading peer-to-peer, crowdlending marketplace and an invoice financing company, Lendo was founded in 2019 by Osama AlRaee and Mohammad Jawabri to help startups apply for borrowing against outstanding invoices through quick and easy steps on their platform. SMEs are a cornerstone of Arab economies, accounting for over 90% of the total economy in the Middle East and over 95% in KSA, but SMEs are heavily underserved by traditional banks, with only 7% of bank loans taken by SMEs in the Middle East. Lendo caters to this unserved market and addresses the liquidity problem small businesses face every day with innovative financing solutions on a simplified, digital platform in a timely manner.
In addition to invoice financing, Lendo has a diverse revenue stream across the lending journey. Small business owners can ask Lendo for expert opinions on ways to strengthen their financial positions. It also offers reverse invoice financing services and helps buyers pay suppliers at an accelerated rate in exchange for a discount through their platform. This creates a sustainable business relationship between the buyer and the supplier at an advantage, and Lendo is able to expand and maintain strong client dynamics on multiple facets of any business transaction. Though small, Lendo’s services also include point of sale (POS) financing as well as e-commerce financing for shoppers and online businesses that wish to finance inventory.
While it offers swift financing with fast and affordable options and flexible terms, Lendo also serves retail and institutional investors with an opportunity to partake in crowdlending. In short, crowdlending is a form of crowdfunding that collects small amounts of capital from a pool of individual investors to give loans to small and medium businesses.
After a company/borrower submits an online application on the website, Lendo takes up to three days to review and approve its profile. If approved, the business can apply for financing of up to 80% of the invoice value sold to its customer. This lending opportunity is then shared on the platform with pre-approved investors who wish to finance/crowdfund the invoice. Lendo generates revenue by charging SMEs a management fee and taking up to 20% of cuts from the investors’ profits, while investors will retrieve the principal and profits one time after the end of the financing period, which typically does not exceed six months.
Lendo awarded the “Excellence in Finance” Award at the FiNext Conference 2020
As the Kingdom’s first-ever company to obtain the Saudi Central Bank (SAMA)’s license to operate as a Shari’ah-compliant debt crowdfunding company, Lendo has earned and demonstrated investors’ trust in its financing solutions as a preferred option for small businesses seeking quick access to capital. We believe this is a huge milestone for Lendo to maintain its leading position in Saudi and eventually expand to the greater Middle East with a strong reputation.
Shorooq Partners invested in Lendo last year as we expect Lendo to open unlocked financing channels for SMEs and help resolve their limited financing options, while providing a reliable and rewarding source of investment opportunities with higher returns for investors/lenders in the Kingdom.
More importantly, the Kingdom of Saudi Arabia, Lendo, and Shorooq Partners all share a common vision of empowering startups and fueling their growth & contribution to the economic development in the region. We are strong believers of infrastructure plays that unlock business opportunities for aspiring founders, and Lendo does exactly this, which we believe is a critical step for the country that is experiencing high growth with an increasing need for more funding.
We love that a startup is backing other startups, as we have been doing, and we will not stop in our endeavors to be a pioneer in this field. We are in a tough period with fundraising challenges, but when goals and incentives are aligned, the future looks bright.
