FrontEdge, a Lagos-based fintech, has raised $10 million in a debt and equity seed round, with over 70% of the funding coming from the debt component.
The fund will help in achieving the mission of facilitating the growth of African cross-border trade by providing SME exporters and importers with working capital and innovative software tools, FrontEdge has set for itself.
Founded in 2021 by Moni Alli, a former McKinsey consultant with a background in digital transformations for major banks in Nigeria, South Africa, and Morocco, FrontEdge addresses the SME financing gap in Africa. The fintech offers a lending-first platform that goes beyond traditional banking models, enabling SMEs to access upfront capital without the need for collateral.
Alli, in an interview with TechCrunch, highlighted the outdated nature of traditional banking processes, where balance sheets are often geared towards large corporates, leaving SMEs underserved. FrontEdge seeks to digitise and tailor financing processes specifically for African SME exporters engaged in cross-border trade.
Unlike banks that rely on collateral-based lending, FrontEdge intervenes with upfront capital based on transaction-based underwriting. The fintech steps in when goods are on an actual vessel or at the warehouse, providing capital with average payment terms set between 60-90 days. This accelerates receivables, allowing exporters to engage in more transactions.
FrontEdge has evolved beyond its lending-first approach, integrating with databases to gain insights into cross-border trading dynamics and underwriting offshore credits. The platform facilitates the setup of overseas offshore accounts, addressing challenges related to capital controls and high fees within the banking system.
The fintech operates as a vertical bank, offering financing, cross-border payments, and offshore accounts tailored to the specific needs of African traders. In addition to financial services, FrontEdge provides software tools such as logistics management, cargo insurance, and document management to complement its offerings.
FrontEdge, listing JP Morgan and Providus Bank among its partners, aims to empower African exporters with funding and tools to compete on a global scale. The company’s CEO emphasizes the importance of creating a level playing field for African exporters against counterparts in South America, Europe, and the U.S.
Since its launch, FrontEdge claims a 20% month-on-month growth of SME exporters on its platform, with customers reportedly tripling their sales. The fintech’s revenue comes from a spread of the transactions it finances, and it emphasizes avoiding losses while demonstrating successful repayments.
FrontEdge plans to use the capital raised to hire more talent, expand its financing product across multiple African countries, and launch additional products to diversify revenue streams. The lead investor, TLG Capital, expresses confidence in FrontEdge’s mission to empower African SMEs and facilitate their engagement in global trade.