Nigerian Lending Startup PayHippo Raises $3 Million To Improve Access To Swift Credit For SMEs

PayHippo, a Nigerian lending startup, has closed a $3 million seed funding to extend quick loans to small and medium-sized businesses. The funding round is the largest the startup has raised, and it comes after it raised $1 million in pre-seed funding earlier this year.

The financing was spearheaded by a host of angel investors, including Ham Serunjogi and Majid Moujaled, the Co-founders of the Chipper Cash; Olugbenga ‘GB’ Agboola, the founder of Flutterwave; Bolaji Balogun, the Chief Executive Officer of investment banking firm Chapel Hill Denham; and Hakeem Belo-Osagie, the founder of Metis Capital Partners. Other angel investors include management from Paystack, Brex, and Tala, and several LPs from PayHippo’s pre-seed investors. The round also had the participation of institutional investors including TEN13, VentureSouq, and Prodigio Capital.

Founded in 2019 by Zach Bijesse, Chioma Okotcha, and Uche Nnadi, PayHippo helps small businesses get access to capital to run and grow their businesses. Notably, the company claims that it disburses short term loans within three hours. “We really focus on keeping this under three hours and making sure that businesses can get the money they need when they need it. Ours is also a product that works for the SMEs in terms of a flexible repayment structure,” said Chioma Okotcha, the company’s Chief Operating Officer. This is far from being the case with traditional banking institutions in the country, whose processes to obtain loans are usually rigorous and time-consuming.

Although small and medium-sized enterprises play a significant role in the Nigerian economy, accounting for 96 percent of businesses and 84 percent of employment in the country, they still face the challenge of funding. Of the more than 40 million small and medium-sized enterprises that exist in the country, only a few have access to formal financing, because they do not have credit scores. It is this problem of credit inaccessibility that Payhippo has been providing a solution to since its launch in 2019. “We had seen that traditional banks and lenders wouldn’t loan small businesses mainly because there were no credit scores, or the collateral requirements were too high. We decided to come into the market and create an instant financing option, where we create a credit score that allows small businesses to get the liquidity they need to buy inventory for business continuity,” Chioma Okotcha said.

A business can apply for a loan through the company’s online platform by providing their business information. Through their backend technology system, the firm uses KYC checks to verify the business’s cash flow data, business owner data, and industry data – all within a few minutes. The average loan disbursed by PayHippo is about $1,300, with the minimum loan being about $200. Businesses are required to repay their loans at the end of the loan period, and doing so promptly helps to build their score record, making them eligible for higher amounts of capital.

The company claims to have disbursed about 5,000 loans since inception, which are valued at $1 million, and with a repayment rate of 97 percent, earning them $64,000 in revenues. It added that the demand for credit is high, fueling its current 25 percent month-on-month growth.

Commenting on the funding, Ham Serunjogi, Co-founder and CEO of Chipper Cash, said: “New financial technologies are being developed and implemented changing the competitive landscape in the financial sector in Africa. Access to credit is a critical necessity for small businesses to manage their daily challenges. PayHippo helps address this need through its innovative approach that provides loans to small businesses in less than three hours enabling them to have access to sufficient working capital to grow.”

A cohort of Y Combinator Summer 2021, Payhippo is one among many digital lenders in Nigeria offering short-term loans to SMEs. Others include Carbon and FairMoney.

According to the company, the new funding will be used to enhance its technology capabilities to support small businesses in Nigeria, and hire more engineers and data scientists.