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After two years bridging loans for Brazilian SMEs, fintech WorkCapital is preparing an international move and plans to launch in Chile and Peru by the end of 2019, company CEO Simcha Neumark told BNamericas.
WorkCapital advances receivables to small and medium-sized companies, charging interest rates on average 34% lower than those charged by traditional banks, according to the executive.
The interest rate is based on a risk analysis that processes thousands of pieces of data with an automated tool based on machine learning and big data, reducing bureaucracy and expediting loan approval, Neumark explained.
"We're the ones taking the risk. We're replacing the bank and the factoring institutions in this model. We came to offer an alternative option to that of these institutions, and at a much lower cost."
WorkCapital's gains come from the banking spread - the difference between the interest rates it charges on its loans and the interest banks charge to lend money to WorkCapital.
The company is backed by large international funds, which means it has liquidity and a lower risk assessment when it goes knocking on banks' doors for money.
In July, for example, the company raised US$8.5mn in an equity funding led by Monashees, FJ Labs, Mindset Ventures and others. A previous round, in 2015, put another US$800,000 into the company.
Fintech has its R&D headquarters in Israel, where Brazilian Neumark went to live in 2013 and where he had the idea of creating the platform. Of the four startup partners, three are Brazilian and one is from the US.
Since the launch of the solution in the Brazilian market two years ago, WorkCapital has reportedly processed information on 35,000 companies on the platform and assessed over 400mn reais (US$121mn) in receivables. Neumark says that it is common for clients to return.
Part of the success can be explained by timing: the 2015-2016 recession in Brazil increased companies' debt at the same time as banks became more conservative in granting loans and credit got more expensive.
Corporate loans granted by traditional banks in Brazil shrank 4% year-on-year in the first six months of this year, according to central bank figures.
Despite the recent reductions in Brazil's benchmark interest rate, known as the Selic, the decrease is yet to effectively reach banking clients and credit is overall still retracted in the country.