FinTech is a buzzword that tends to be applied to any financial company doing something with technology in one way or another. LulaLend is a financial technology company that actually uses the word in a meaningful way as it successfully combines technology and financial services.
LulaLend is South Africa’s first and only automated short-term business finance solution. The company allows potential clients to apply for short-term business loans in minutes and have their application approved in hours.
The company is founded by Chief Technology Officer (CTO) Neil Welman (on the photo at the top left) and Chief Executive Officer (CEO) Trevor Gosling (photo top right). Ventureburn was fortunate enough to catch up with Gosling to discuss this new venture.
Gosling comes from an investment banking background after working at KPMG, Rand Merchant Bank and Goldman Sachs, before co-founding LulaLend. He is the younger brother of Groupon SA co-founder Wayne Gosling. Trevor Gosling says he was motivated by his older brother’s own actions to leave investment banking and pursue his own startup, 5 oz, which he successfully sold to Naspers in May 2013.
Like Gosling, Welman also came from an investment banking background, but was involved in development credit platforms at companies such as Barclays Capital, Royal Bank of Scotland and Merrill Lynch. He is the chief architect of the LulaLend system.
With both founders having strong banking backgrounds, is it any wonder they chose a finance-focused start-up?
Gosling said the idea came from trying to find funding and capital for his previous ventures. When he went through traditional channels, such as banks, he found the process very long and difficult. LulaLend’s goal is to help small and medium-sized enterprises (SMEs) with quick loans without going through traditional channels.
The duo wanted to focus on something that could add value to the economy and tackle a missing piece of the financial sector – easy financing for SMEs.
Having been smoothly launched in May, Gosling says the service currently has a 60% to 70% approval rating for applicants. In order for potential clients to apply, they must have been in business for at least one year and have a turnover of at least R500,000 per year. The whole process is handled by the customer through the LulaLend website and is rechecked by staff once the request is received to verify details. LulaLend uses PayFast and SureSwipe as both online and offline payment processors.
The funding model is based on quick loans with short repayment periods. The company is currently offering loans ranging from R20,000 to R250,000, with the limit set to rise to R500,000 at a later date. A standard of six months is offered to clients in order to repay the loan amount, but if the client is able to repay the amount sooner, they will save. The interest rate is calculated at 5% for the first two months and 1% for months three to six, which amounts to an overall charge of 14%.
When they sought to launch LulaLend, Gosling and Welamn had their own financial problems and struggled to find partners locally. The problems stemmed from the fact that South African investors were inexperienced with fintech and the lending business model and no one seemed to understand their model. The pair decided to look abroad where they found exactly when they were looking, but also have local investors.
For our mini interview with Trevor Gosling, listen to the podcast above.