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Revenue-based lending startups continue to raise capital in MENA, and the model is working well

TechBrunchBy TechBrunchDecember 24, 20243 Mins Read
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In an era when raising venture capital has become more difficult, many companies are turning to non-dilutive revenue-based financing (RBF) as an alternative. As a result, many startups sprung up to meet the challenge, especially in the MENA region, which adopted the model like a duck to water. The latest is CredibleX, which raised $55 million in a seed financing round led by Abu Dhabi-based Further Ventures to capitalize on the burgeoning market for revenue financing in the Middle East.

CredibleX, which provides working capital loans to small and medium-sized enterprises, operates in a market where MENA competitors such as FlapKap and Flow48 will scale up and raise capital in 2023. Capital ($528.1 million to date), and Incomlend ($25 million to date), not to mention other companies such as Modifi (which has raised $353.6 million to date) and Drip.

So what's going on here?

While it remains difficult for SMEs in MENA to access working capital through traditional banking channels, CredibleX has found its way to market. We partner with leading aggregators to track small businesses in vertical ecosystems.

CEO and co-founder Anand Nagaraj told TechCrunch: Most other companies in this space work with small businesses to try to get their accounts receivable/sales quota. ”

In particular, revenue-based lending works very well for small and medium-sized enterprises in high-income countries like the UAE and similar countries. This is because it is difficult to obtain loans from so-called development finance institutions, which are primarily set up to invest in projects at low cost. An economically developed country.

The way this platform works is very “MENA regional” given the explosion of platforms established for service-based industries such as restaurants, and the MENA has millions of them. .

For example: Small businesses, such as restaurants, use platforms like Talabat (acquired by Delivery Hero for $158.52 million in 2015) to deliver food and want access to RBF. Once you apply for a loan through the Talabat platform integrated with CredibleX, upload your historical sales data and ratings, CredibleX will make all credit decisions for loan issuance within 24 hours.

The restaurant then repays the loan through Talabat making payments directly to CredibleX (CredibleX also has similar relationships with 37 other similar partners).

The company started operations in March 2024 and claims to have issued more than Dh100 million (US$27 million) to small and medium-sized enterprises.

Nagaraj previously worked at Citi and went on to found Invoice Bazaar, a supply chain finance platform that helps small and medium-sized businesses supplying goods to large corporations get early payments. After exiting that startup in 2021, Nagaraj launched CredibleX with co-founders Ahmad Malik and Hassan Reda.

Nagaraj explained: “Our approach will help us reach more SMEs and will certainly help if the situation worsens in terms of recovering repayments from SMEs.” CredibleX is the CEO of Abu Dhabi Global Market But it is fully regulated by the FSRA.

This seed round consists of equity from Further Ventures and debt from various providers including Kilgour Williams Capital. Additionally, Ventures has LPs including ADQ and Mastercard.



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