Fintech company Behalf, which provides short-term loans and working capital to small and medium-sized businesses in the US, has completed a $150 million debt issue, led by Soros Management Fund (George Soros's fund) and the Viola Credit fund. The financing is replacing $100 million in debt previously raised by the company, which has provided loans to tens of thousands of businesses since 2014.
Brothers Benjy and Shai Feinberg founded Behalf in 2012, together with Jeremy Esekow. The company has raised $60 million to date in exchange for shares from various funds, including Viola Growth, Spark Capital, Sequoia Capital, Maverick Ventures Israel, Vintage Investment Partners, and MissionOG, the investment company of former Mastercard CEO Gene Lockhart. The company is expected to announce another share offering soon.
"Our long-term aim is being a financial concern to all intents and purposes," says Behalf CEO Benjy Feinberg. "This is a significant step forward for Behalf. This funding allows us to expand our fast-growing e-commerce B2B financing platform and enhance our ability to provide the best business terms to customers, in a fraction of the time of a traditional business lender”
Behalf has 60 employees in its development center in Ra'anana and 30 more dealing with business aspects in its offices in New York. The company's technology makes it possible to rapidly analyze the data of businesses asking for loans, and to make decisions about loans of up to $50,000 in less than 24 hours. The loans are granted for 1-6 months, and Feinberg says that repayment rates are matching expectations, which supported the additional round
"When you boil it down, we're doing the same thing as the banks in the small and medium-sized business segment. Our advantage is a technological one; we adapt it to the existing demand, so we do it quicker and based on big data. The entire banking system is moving in this direction, in contrast to a situation in which, historically, to exaggerate a bit, they knew the person, his father , and his history, and on the basis of a subjective impression would decide whether to grant a loan, in a process of personal involvement that also took time."
Businesses interested in obtaining credit from Behalf begin by registering on the company website in a process that includes feeding in the particulars. Based on the data fed into it, the system decides the volume of credit to which they are eligible, and they are invited to type in suppliers' names and transfer to them payments for products or services received directly through the platform. At the end of the process, the borrowers choose the repayment period they want, with interest on the loans starting from 1% per month, and increasing when the borrower's data are less promising. "Sales turnover between businesses in the US amounts to $6 trillion annually, says Feinberg. "Almost 90% of this market operates in old industry with technologies like checks and money transfers, telephones, and faxes. There are almost no credit cards in it; everything is done the old-fashioned way. What our company is doing is to streamline this - instead of somebody calling and sending a check or coordinating with a fax, he will make the transfers through a website. This is trivial for us, but most of the industry is still handled in a different way. In the end, you adapt a technological solution to the credit industry."
Viola Credit partner Uri Galai says, "It is necessary to realize that the banking market has been undergoing significant disruption in recent years. The ability to perform analyses in very short times on the basis of big data is technology that has developed more or less since 2008, and we're seeing more and more concerns entering this field. In absolute terms, the market is huge. Demand for credit from small and medium-sized businesses in the US is around $300 billion a year, but the banks are able to support approximately $200 billion, meaning that there is no solution for $100 billion in annual demand. This is therefore a substantial niche with phenomenal growth potential."
"Globes": Why aren't the banks capable of handling all of the demand?
Galai: "Their costs are too high, and they therefore give up in advance on most of the small loans, both to businesses and consumers. Incidentally, today there are new regulations in the US and Europe, with an emphasis on Europe, requiring banks incapable of handling the demand to refer the borrowers to alternative lenders, i.e. technological platforms that are able to grant loans. This is already part of regulation."
In addition to announcing its financing round, Behalf today announced a partnership with US bank FinWise. "On the face of it, it is liable to look like just another partnership with a bank," Feinberg says, "but this is a far more important for a fintech company like us, because it is a partnership that makes it possible to grant our loans under the supervision of the US banking system. This shows the company's maturity, and that we are meeting the standards in the US. This is a significant milestone on the way to being an important financial concern."
Published by Globes [online], Israel Business News - www.globes-online.com - on February 5, 2018
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