Contxto – Getting access to credit is a serious challenge for most small and medium-sized businesses. Not only do they enforce aggressive loan conditions but also notoriously long wait times for approval. For this reason, Paypal partnered with Konfío, a Mexican platform that assesses creditworthiness in a matter of minutes and facilitates the overall process of securing credit funding.
Not long ago, Paypal launched a new business unit called Paypal Working Capital. This new product’s goal was to enable smaller businesses to access quick liquidity options to improve cash flow. Now, it is even easier.
The Silicon Valley firm recently announced a new partnership, this time with Mexican startup Konfío. Through Konfío’s platform, users can request loans and get an almost immediate response. Using alternative data, the company can process several scenarios as well as calculate risk and default probability. With this, it sets the proper terms for the credit – or not.
Now SMEs and individuals with enterprising activity are eligible for working capital credit due to this new partnership. Users must have a pre-existing Paypal account, log in and fill a form in order for Konfío to asses the credit rating of the requester.
Then, Konfío’s algorithm goes to work, analyzing the provided information. In a matter of minutes, users will receive a definite response saying whether or not the candidate can access the credit.
With this new partnership, the two companies will enter a market of over five million businesses and individuals seeking non-traditional liquidity alternatives. Currently, Mexico is the third Latin American country with the most amount of independent professionals. It is around 12 percent of the population, according to a Workana’s report.
The working capital credit market is a potentially huge one, estimated to be worth over US$162 billion. Not only is the market big enough, but it is also being underserved.
According to a Konfío report, only three out of ten businesses in Mexico have access to enterprise loans. This obviously caps market growth and deprives many entrepreneurs of better business opportunities.
It is no news that small businesses also have a hard time when dealing with cash inflow and outflow. To secure clients, they might need to extend longer payback periods even if suppliers aren’t supportive.
“We are excited to be able to share our mission with an innovative company such as PayPal and offer entrepreneurs who use the platform a real alternative so they can continue to strengthen themselves,” said David Arana, CEO and founder of Konfío. “We are committed to being an ally of the growth of small and medium enterprises. This alliance is one of the first initiatives we will implement in 2019.”
“We have a commitment to financial inclusion in providing means for SMEs and independent entrepreneurs to grow their businesses,” added Blas Caraballo, director of PayPal México.
“They credit 75 percent of the jobs that this sector generates in the country. With this alliance hand in hand with Konfío, we will help reduce the existing access gap to credit while supporting the growth of Mexican entrepreneurs so that they can strengthen their companies and achieve financial health.”
According to Paypal’s press release, 98 percent of the businesses granted funding from Konfío are actually showing better cash flow stability. Moreover, 32.1 percent reported an increase in overall sales per month, while 22.8 percent believe it optimized operations.