News & Analysis

Spotcap Australia hits $11 million lending milestone to SMEs as it celebrates one year of business

- May 26, 2016 4 MIN READ

Fintech startup Spotcap has today announced its $11 million milestone in short-term credit lines and loans to SMEs as it celebrates its first year of business in Australia. Looking past the one year mark now Spotcap is now focused on expanding its local presence to meet increasing demand for alternative finance for micro, small and medium-sized businesses in Australia.

Since launch last year Spotcap, which was founded in Germany, stated it has experienced 30 percent month on month growth. Lachlan Heussler, managing director of Spotcap Australia said, “Since we launched we’ve gone from strength to strength and really hit our stride earlier this year. We’re looking ahead and expect the momentum to continue as we enter our second year of operations.”

These results indicate not only an increasing need for accessible finance, but also a willingness for SMEs to look at Australia’s growing fintech landscape for alternative funding, borrowing and lending opportunities.

Earlier this year Spotcap raised close to $50 million in its third financing round and announced a new partnership with private equity firm Finstar Finanxial Group. The shareholder has been working towards the implementation of value-adding strategies to grow the startups operations in Australia, Spain and the Netherlands.

The raise came as Spotcap’s third round of financing in 18 months, with the startup previously raising $20 million from Rocket Internet, Access Industries, and Holtzbrinck Ventures, and $8 million from Kreos Capital.

Spotcap, founded by Toby Triebel and Jens Woloszczak, was established in Madrid in September 2014, and launched in the Netherlands in early 2015 before Australia was chosen as its third expansion market last year.

In the early stages of development Heussler explained that Spotcap made a certain amount of assumptions about what customers wanted: Spotcap initially targeted early stage SMEs and launched a loan product last year with a cap of $100,000 with a six month repayment time frame. However, Spotcap found that over the course of the year Australia’s small businesses were quite large compared to other SMEs around the world. Therefore the company increased its loans to $250,000 with a 12 month repayment schedule and since has experienced rapid growth and adoption among small to medium sized businesses.

Spotcap has also been refining its products and streamlining its application process to make it easier for SMEs to access unsecured working capital products to grow their businesses.

Any small business owner would agree that time management is key and finding the time to work on the financial side of things can be quite difficult. Spotcap saw that many of its customers were applying for loans after work hours around eight to 10pm or even on weekends.

“We found out that our clients are super time poor and we need to offer a product that allows them to complete an application in the minimum amount of time possible and do it at a time that’s convenient for them,” said Heussler.

For Spotcap, Heussler said it’s all about taking on customer feedback to deliver a product that’s easy to use with minimal time spent filling in applications and waiting for a response, with reducing the amount of clicks it takes to complete an application making a big difference to the customer conversion rate.

While many fintech startups focus on delivering products to fill gaps in the market and meet the needs of their customer base, banks are still trying to educate their customers on what they should do to appeal to them. Heussler said this pattern of thinking is quite the antithesis of what financial services should be thinking about.

Recently the Australian Bank Association and CPA Australia launched a website to educate small businesses on what banks look for in assessing loan applications.

The difference between the approach of banks and the approach of fintech companies is that banks aim to inform SMEs on their product offerings and fintechs aim to build their products based around what customers need.

“We shouldn’t be telling the small businesses what they should do to appeal to us, it’s how we can appeal to our small business customers,” said Heussler.

The potential of the space has seen a number of competitors arise over the last year. Recently fintech startups like Neu.Capital, Skippr and TruePillars have emerged to focus on helping SMEs to find the right finance loans for them. The space is heating up quickly and many of these startups are experiencing quick growth patterns.

Since 2010, Reserve Bank of Australia (RBA) figures have shown a steady decrease in loans under $500,000. Small loans have decreased by 7.6 percent, while larger loans over $2 million have risen by 35.7 percent. With small businesses responsible for 70 percent of employment in Australia, it is important they have the money to fund their growth.

In December last year the annual Fintech 100 report was released, revealing seven emerging Australian startups as rising stars globally. The report highlighted a major funding boom with fintech companies named in the report collectively raising in excess of US$10 billion.

NSW Minister for Industry, Resources and Energy, Anthony Roberts, said, “This report confirms that Sydney is not only the biggest fintech hub in Australia but also Asia.”

“This is because seven out of the nine fintech companies in the top 100 list are based in Sydney. What’s more, Sydney has more fintech companies on the list than any other Asian city,” he said.

As a collective fintech companies are growing extremely quickly, however Heussler believes they are only just scratching the surface in terms of what can be offered: Spotcap is very much focused on the unsecured, online balance sheet lending to small businesses, which he said has seen very little competition over the last year.

“You will find there will be around three to five core brands that corner the market and those players have been operational for 12 months and beyond it’s up to us to grow the overall sector in the market,” said Heussler.

Spotcap has a vision to become a global leader in online unsecured and short term loans for small businesses. Heussler believes there is ample opportunity to roll out into other markets and is currently conducting preliminary research into markets in the Asia-Pacific region.

Spotcap hope to achieve rapid expansion in Australia and aims to triple its $11 million credit milestone to SMEs by next year.

He said, “We ramped from zero to hit this milestone, indication how quickly this business is growing and there is a lot more yet to come.”

Image: Lachlan Heussler. Source: Supplied.