FrontEdge, a Lagos-based fintech, has secured $10 million in a seed round comprising debt and equity to enhance cross-border trade for small and medium-sized enterprises (SMEs) in Africa. The funding round, led by TLG Capital, aims to address the financing gap that disproportionately affects SMEs in international trade, with only 30% of trade volumes finding financial intermediaries in banks. FrontEdge provides working capital and software tools for SME exporters and importers involved in cross-border transactions. The startup’s platform focuses on transaction-based underwriting without collateral requirements, aiming to accelerate receivables for exporters and facilitate more transactions.
Key Points:
- FrontEdge, a Lagos-based fintech, has raised $10 million in a seed round, comprising debt and equity, to support cross-border trade for SMEs in Africa.
- The funding round was led by TLG Capital, with participation from digital freight forwarder Flexport and other backers.
- FrontEdge was founded in 2021 by Moni Alli, a former McKinsey consultant and private equity professional with a background in digital transformations for tier-one banks.
- The fintech aims to address the financing gap in African international trade, where only 30% of trade volumes find financial intermediaries in banks, disproportionately affecting SMEs.
- FrontEdge provides upfront capital to SME exporters based on transaction-based underwriting without requiring collateral, differentiating itself from traditional banks.
- The startup intervenes at various stages of the trade cycle, including when goods are on an actual vessel or in the warehouse, with payment terms set between 60-90 days.
- FrontEdge has evolved beyond a lending-first platform to become more robust, offering insights into cross-border trading dynamics, underwriting offshore credits, and facilitating overseas offshore accounts.
- The company acts as a vertical bank tailored to the needs of African traders, providing financing, cross-border payments, offshore accounts, and software tools for logistics management, cargo insurance, and document management.
- SME exporters using FrontEdge’s platform have reportedly tripled their sales, with the company recording a zero default rate after performing over 50 contracts encompassing multiple trades and invoices.
- The new funding will be used to hire more talent, scale the financing product across Nigeria, Ghana, Ivory Coast, and Kenya, and launch additional products to diversify revenue streams.
Analysis: FrontEdge’s $10 million seed round signals growing interest and investment in fintech solutions addressing the financing gap for SMEs involved in cross-border trade in Africa. The funding, led by TLG Capital with participation from digital freight forwarder Flexport, underlines the recognition of the untapped potential in the $1.2 trillion annual value of international trade volumes in Africa. FrontEdge’s focus on providing upfront capital to SME exporters based on transaction-based underwriting without collateral requirements addresses a key challenge faced by smaller businesses in accessing financial intermediaries in traditional banks. The platform’s expansion beyond lending to offer comprehensive services, including cross-border payments, offshore accounts, and software tools, positions it as a strategic partner for African traders seeking to compete globally. FrontEdge’s success in recording zero default rates and enabling SMEs to triple their sales reflects positive outcomes from its approach. The funding will support the company’s growth, allowing it to scale its financing product across multiple African countries and launch additional products to diversify revenue streams. Overall, FrontEdge’s funding round contributes to the evolution of fintech solutions fostering financial inclusion and empowering SMEs in the African cross-border trade landscape.
