Zuvy, a new Fintech startup based in Nigeria, has raised $4.5 million in funding to provide invoice financing for small and medium-sized enterprises (SMEs) in Africa.
The company aims to address the difficulties faced by SMEs in accessing capital for their operations, as traditional financial institutions often require extensive documentation and collateral, making it challenging for informal businesses to qualify for loans. Additionally, these institutions often offer loans at high interest rates, discouraging many businesses from applying.
One of the major issues faced by SMEs in Africa is payment delays. When SMEs provide services to larger corporations, they often experience delays in receiving payment, which can last from 30 to 90 days or even up to six months in some cases. These delays can have a significant impact on the cash flows and revenues of SMEs, with 48% of MSMEs in Nigeria reporting delayed payments and 33% experiencing negative effects on their cash flows.
In response to these challenges, fintech startups like FairMoney and Pennee have started providing financing solutions for SMEs, offering loans that are often received within 48 hours.
Zuvy, founded in 2021 by Angel Onuoha and Ahmad Shehu, aims to provide invoice discounting and an invoice management tool for SMEs in Africa. The founders were motivated by their personal experiences and a shared interest in digitizing and providing financing for small businesses. Onuoha witnessed the impact that invoice financing could have had on his aunt’s food catering business, which relied on large contracts from oil and gas companies that paid her after 30 or 45 days.
Zuvy primarily targets businesses in the fast-moving consumer goods (FMCG), healthcare, and supply chain industries, where payment delays are common. To access invoice financing from Zuvy, businesses need to provide an invoice for the services they have rendered, and Zuvy provides them with cash.
The startup verifies the legitimacy of the application by liaising with the business receiving the service and ensures repayment is easier by having the payment domiciled with Zuvy. Repayment terms range from 30 to 90 days, based on the needs of the business.
Compared to traditional loans, Onuoha believes that invoice financing is a more suitable option for small businesses, as it allows them to access funds based on the invoices they will already earn. Zuvy makes money by charging a fee when paying out cash advances and also provides users with a wallet through a partnership with commercial banks. Its inventory management tool helps determine the financing amount offered to each business, tailored to their needs and repayment capacity.
TLG Capital led Zuvy’s funding, with $4 million in debt and $580,000 in equity. The funding will be used to expand Zuvy’s loan book and meet the growing demand from vendors in Nigeria. Zuvy plans to focus on expanding its coverage in the Nigerian market and has no immediate plans for international expansion.
Zuvy’s innovative approach to invoice financing addresses a significant challenge faced by SMEs in Africa, offering a faster and more accessible financing option. By providing cash based on invoices, Zuvy aims to support the growth and development of small businesses in Nigeria and potentially expand its services to other African countries in the future
