FrontEdge, a Lagos-based fintech, has raised $10 million in debt and equity funding to boost cross-border trade in Africa. This substantial investment, led by TLG Capital and featuring participation from Flexport, aims to empower African exporters.
The focus is particularly on small and medium-sized enterprises (SMEs) overcoming financial hurdles. Moni Alli founded FrontEdge in 2021 as a digital trade-finance platform, aiming to address the financing challenges encountered by SME exporters and importers in Africa. The platform provides working capital and sophisticated software tools to facilitate seamless cross-border and international transactions.
Financing Gap
A significant issue in African international trade is the limited involvement of financial intermediaries, with only 30% of trade volumes finding support from banks. This financing gap disproportionately affects SMEs, hindering their growth potential. FrontEdge offers upfront capital based on transaction-based underwriting, eliminating the need for collateral and accelerating the financing process.
Unlike traditional banks, FrontEdge intervenes at crucial points in the trade cycle. The company provides financial support when goods are on vessels or in warehouses. The startup’s intervention helps bridge the working capital gap, enabling exporters to engage in more transactions. The company’s lending-first platform has evolved into a comprehensive solution, integrating databases to provide insights into cross-border trading dynamics. FrontEdge goes beyond financing, acting as a vertical bank tailored to the needs of African traders. The platform offers a range of services, including:
- cross-border payments
- offshore accounts setup
- logistics management
- cargo insurance
- document management
Achievements and Future Prospects
FrontEdge’s impact on SMEs is evident, with its customer base growing by 20% month-on-month since its launch. SME exporters using the platform have reportedly tripled their sales, highlighting the effectiveness of FrontEdge’s approach. The company emphasizes successful repayments, boasting a zero default rate after executing over 50 contracts, each comprising multiple trades and invoices. The company also aims to diversify its revenue streams beyond financing by launching additional products.
FrontEdge’s successful funding round marks a pivotal moment in the evolution of African international trade. As the fintech continues to empower SMEs and bridge financing gaps, its expansion and diversified services are poised to make a lasting impact.