Contxto – It is nothing new to say Brazil’s financial inclusion is still flawed. SuperSim, a microlending fintech startup from São Paulo sees there is still opportunity in the market and recently raised a R$30 million (-US$5.57 million) debt round in order to, as they and other Brazilian lenders like to claim, “reinvent Brazil’s credit market”.
One of the things that still haunts financial consumers throughout Latin America is the astringent covenants and restrictive practices for assessing creditworthiness and granting loans.
“SuperSim was born out of a dream shared by all the members of our team: saying Yes to as many Brazilians as possible, in a fast, safe and uncomplicated way,” says their website.
The company focuses particularly in the C and D socioeconomic classes, effectively democratizing access to financial products to a broader consumer base. But at the same time, they face a higher default risk.
In order to ensure profitability, their repayment periods are limited to a four to 12 month range. They ensure this by asking users to submit their mobile phones as collateral, an increasingly common requirement for working class borrowers.
SuperSim’s President, Daniel Shteyn, states that “almost no other fintech has been delivering money to new customers, but us. To maximize the acceptance rate, we use the cellphone as a guarantee. Our mission is financial inclusion that works in practice.”
The meaning of a Covid-era debt round
The company told Contxto that it intends to raise its Series A round before the year’s end. Meanwhile, SuperSim has experienced a fourfold increase in loan capacity compared to April of this year.
Some of SuperSim’s investors include Distrito Ventures and two angel investors. Navi joins its cap table and as lead investor for this round.
Clearly there is interest in what SuperSim is offering.
However, I can’t help but wonder what a debt round means within the context of a global pandemic and the (hopefully temporary) drying up of some types of investment.
Though we initially thought it was an equity round, the company confirmed it was in fact credit.
Nothing to be surprised about, considering balance sheet lending is a common practice among microlending startups. Meaning, they capture credit from other institutions and reallocate it at higher rates, smaller repayment horizons, and increased risk, to turn a profit from the spread.
Of course, this is all just an educated assumption in turbulent times. Yet, there is a proliferation of pre-Series A bridge rounds becoming a trend in Latin America. I wouldn’t be surprised if debt extensions were also the latest tool to extend the lives of promising startups.
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