Texas here we come: Latin America’s No. 1 crowdlending platform expands empire

 

 

Founded in Chile in 2012, SME-focused crowdlending platform Cumplo has grown apace.

The company has handled almost US$600mn in invoice-backed, short-term SME loans – mostly for working capital – since it opened its doors.

Double-digit growth is being spurred by operations in home market Chile as well as in Mexico, which launched in early 2018. Indeed, Cumplo expects to be handling around US$5mn-7mn in loans a month in Mexico by the end of the year, up from around US$500,000 a month at the end of 2018.

Today, Cumplo – whose platform brings together individuals and institutional investors with prospective SME borrowers and is based on a factoring model – is executing a plan to expand into neighboring Peru as well as Austin, Texas, in the US.

The company is deciding whether to enter Peru in partnership with a local player or go it alone – which will determine how long it will take to set up shop there. In terms of the US, Cumplo - founded by entrepreneur and former president of business accelerator StartUp Chile, Nicolás Shea – plans to open its doors in 1Q20.

To find out more about the company and its expansion plans, BNamericas spoke with Cumplo CEO Gonzalo Kirberg.

BNamericas: We last spoke about a year ago. How are things going?

Kirberg: It’s been a very exciting time. We’ve consolidated the business model in Mexico. The first six months, as we had planned, was just about getting the business going, understanding the local dynamics, how SMEs really obtain financing in Mexico. One thing is what official statistics say; another is what you actually find in the market when you go.

We started very small and in May this year we became the biggest crowdlender in Mexico and we are growing at around 25% a month. It’s booming, the business over there, even though the crowdlending market is still very small. The lending market for SMEs, though, is huge.

There’s a big opportunity, since access to loans in Mexico by SMEs is very low. Most of the business they have with banks is associated with checking accounts, not from loans. There are not a lot of incentives [for banks] to lend money to small and medium-sized enterprises.

Another thing that has been really important for us – and was a doubt – was the question of whether our risk model would work in another market. You never know until you do it.

The good thing is that we’ve been there for a year and a half, we’ve already done US$10mn in loans with no overdue [payments] and no defaults. The risk model has proven extremely successful.

Mexico was the first country to have a fintech law and that was one of the reasons we went there.

BNamericas: What about Chile?

Kirberg: In Chile, we’re growing nicely.

This year we’ve grown about 30% - and we think we can do more. We’re aiming to finance US$220mn-250mn through the platform in Chile. Last year we did US$160mn. As we have grown, we have been able to reach new segments. In comparison, the traditional financial segments serving SMEs are seeing the amount of loans decreasing.

We have a big chunk of institutional investors and professional money coming in. The average cost for limited-risk loans is going down on the platform and we are becoming very, very competitive and really moving closer to achieving our dream of getting the money at the most reasonable cost, according to risk, to the SMEs, which need it to grow.

BNamericas: Cumplo is expanding into Austin, Texas, in the US, and into Peru. Why these two markets?

Kirberg: One of the great things about being in Mexico is that the US becomes so much closer. There’s a Stanford [University] study that says that, in the US, there are more than 4mn SMEs with a Latin-Hispanic owner. That’s bigger than the market in Mexico. We’d say the biggest Latin market for SMEs is not Mexico, it’s the US. That’s kind of amazing.

Even though you’re in a very developed market, minorities are not well served in terms of their financial access and costs and the drama tends to be the same. The opportunity is huge and there is a lot of cross-border business: Mexicans with businesses in the US and Americans with businesses in Mexico.

Latin-owned businesses are concentrated in the south of California and Texas. It became kind of an obvious choice to move into the US.

Peru is a pretty comfortable choice of expansion for Chilean businesses because there are [already] a lot of Chilean businesses in Peru. It is easy to do business for Chileans. And a big part of it is that they approved an invoicing law that is very similar to Chile’s. I think it could be a quick win. 

BNamericas: Turning back to Chile, the government has a tax reform bill in congress. One aim is to increase support to the SME sector by allowing more firms to qualify for a special tax regime. What’s your outlook on the SME market? For example, do you see it growing?

Kirberg: There’s a consensus that we need to help SMEs develop. Seventy percent of the workforce corresponds to SMEs. The tax reform will surely help. I think that’s the only part where there is across-the-board agreement. There is a consensus that they need tax breaks and that they cannot be subject to the same rules as well-established companies.

[Other, existing, measures] such as the 30-day payment law will have a positive impact on our economy but all changes take time.

[Under the terms of the law, invoices must be paid within 30 days unless the SME and supplier agree to a longer term. Also, an SME that sells an invoice to obtain working capital is not liable for any late charges if the supplier does not pay on time.]

BNamericas: Any final thoughts?

Kirberg: We’re working on a lot of things – not all of them we can mention – but in general terms we think that the ultimate solution would be an SME delegating all their invoices to Cumplo, whether they need financing or not.

Collection and financing – that is the ultimate solution for an SME. When you talk to SME owners, they tell you that they spend a lot of time getting financing lines and collecting their invoices – and that’s not where they generate value.

We’re working on various fronts to be able to offer that complete solution.