How big data is helping small businesses get financing
Armed with Facebook and financial data on small businesses, GrowthBond is ramping up funding offerings in Africa
Getting a small business loan can be a huge hassle. The entire process, including paperwork, meetings, and other bureaucratic requirements, can often take several months. But according to Ferdinand Kjaerulff, the founder of GrowthBond, the process doesn’t have to be this difficult. In fact, to foster economic growth in emerging markets, it is vital that we solve the problem of providing financing for small and medium-sized companies.
Ferdinand’s company is one of several fintech startups opening up financial systems and replacing traditional systems with fast, easy-to-use apps and services. Ferdinand has worked with technology startups for the last fifteen years, covering everything from 3D technology to freelancing and e-learning. In 2018, he founded GrowthBond, which helps small businesses get funding more easily. GrowthBond provides funding to small businesses — many of which would fail to get credit from larger, traditional banks — not by spending months reviewing their financial histories but by using what Ferdinand describes as a more efficient, automated platform.
The company, where Ferdinand serves as head of operations, offers up to $50,000 in credit to small businesses. The GrowthBond model is relatively simple. GrowthBond looks at how a company’s Facebook ads and Stripe sales metrics are doing and then gives the company a loan based on those figures. The loan amount can vary between $100 and $50,000. That money helps extend the company’s reach, and GrowthBond charges a 20% commission from new sales until the loan is repaid.
GrowthBond takes the same kind of data used by banks to ascertain whether a small business is eligible for funding, but it uses automated systems to manage the process. Customers give the company access to their Facebook, Google, PayPal, and Stripe data. GrowthBond then connects and analyses these data sources to provide funding.
GrowthBond mainly targets small businesses left on the sidelines by big banking institutions, but it also works to give customers in traditionally ignored economies, such as Kenya and Gambia, funding. With ignored economies and minorities receiving a tiny fraction of business funding globally, it’s no wonder that entrepreneurs worldwide are hungry for new sources of funding to propel the much-needed growth in emerging markets. GrowthBond is answering the call from small businesses in the developing world that have been denied access to capital from the traditional banking system.
