Creditas where Credit’s due

Latin American fintech companies look set to remain in the news right up until the holidays as Brazil’s Creditas becomes the latest business from the region to raise new money. The alternative lender has raised a whopping $255.0 million in fresh financing as its underlying business continues to grow.

The latest fundraising round will value the company at $1.75 billion which is well into Unicorn territory.

Research house CB Insights recently reported that venture cap and PE investments into LATAM fintech’s has risen from just $50 million in 2014 to more than $2.10 billion in 2020 those funds were spread across 139 deals.

The names investing in Creditas in this round include LGT Lightstone, Wellington Management, Tarsadia Capital. They join a roster of the previous investor such as SoftBank’s Vision Fund, its Latam Fund and Amadeus Capital. In all Creditas has raised $570.0 million in external funding.

Creditas intends to use the new funding to expand beyond the home and auto finance loans that it has built its business on to date and to extend its footprint into other LATAM markets with Mexico top of the list for expansion.

Those watching this closely may recall a recent article on Mexican challenger bank ALBO, it’s own successful fundraising and the attractive demographics of the Mexican market place for financial service disruptors.

Creditas was founded back in 2012 from a cramped office in Sao Paulo but it has grown quickly from those humble beginnings and now has more than 1600 employees working from four offices in Brazil, one in Mexico and another in Spain.

The company’s loan portfolio is worth around $200 million currently making it the largest Fintech secured lender in Brazil. Creditas is also moving closer towards profitability with disclosed losses narrowing from 74.90 million reals to 40.50 million.

Creditas’ new products are likely to include payday loans and a buy now pay later retail offering aimed at consumers. It will also look to expand its existing auto loans franchise.

In a statement that accompanied news of the financing round Paulo Passoni, managing partner of SoftBank Latam fund said that: “Creditas is still in the early innings of penetrating the huge untapped secured lending market in Brazil and Mexico”

Brazil has a population of around 210 million and as in Mexico many of those people live in urban areas. The average Brazilian is 31.40 years of age and 65% of the population own or use a smartphone. That figure is expected to rise to 75% by 2025 according to research from Statista.com

Creditas looks like a growing business operating in underserved markets that has been able to attract substantial funding from some prominent venture investors. Against that its a business that will have to contend with the highly cyclical nature of both the Brazilian and other Latin American economies and that can prove very testing indeed.