There's another entrant in the startup race to provide financial services to Latin America's small and medium-sized businesses.
Financial services have been a huge opportunity for startups coming out of Brazil, Colombia and Mexico in recent years, and now Xepelin, a new company from Chile, is looking to join the fray.
Xepelin's founders, Sebastian Kreis and Guillermo Molina Carvallo, launched their company with the vision of creating a new kind of online bank for Latin America's small businesses.
Sebastian Kreis, chief executive officer, Xepelin. Image Credits: Xepelin
The company's pitch to business owners depends on a variation of the lending tool known as factoring, where small businesses can take out loans based on the income they're expecting to receive. In Latin America, where small businesses have limited avenues to traditional loans, according to Kreis, factoring represents a novel solution.
Xepelin already has a multimillion dollar credit line on the books in addition to a small round of initial financing and the company will be using both the credit line to bring customers in and the equity infusion to continue developing revenue management and resource planning tools for its customers.
Starting in Chile and Mexico, where the two founders have a long history in the financial services world, the company expects to become a player across the continent in line with the growth of private debt services for small businesses.
Kreis estimates that debt financing in Latin America could grow to 70 times its current size given changes to the regulatory environment and increasing demand for digital financial services over the next decade.
In the first stage we developed the new standard for SMBs' working capital financing in LatAm, focusing on our client’s user experience, financial needs (not only transactions) and the way they manage their working capital. Xepelin gives SMBs access to capital in an easy and efficient way.
Mexico is a good indicator of the potential size of the market, according to Kreis. There only 300,000 businesses -- out of more than 6 million registered companies -- have sales and account executives offering revenue management and credit lines.
These money managers have a portfolio of 300 companies that they work with, while midmarket companies may work with as many as 1,000 to 5,000 small businesses.
So far, Xepelin has raised $3.5 million in early-stage funding from investors including Oskar Hjertonsson, Manutara Ventures, Ignacio Canals, Gonzalo Rojas, FJ Labs, Diego Fleischmann, and Daniel Undurraga. The most recent capital infusion, a $2.5 million round led by Impact Ideas VC closed earlier this month.