Australia-based Judo Capital has signed a $350 million debt facility agreement with Credit Suisse, reports Business Insider Australia. The small- and medium-sized business (SMB) lender, which launched earlier this year, says the capital will allow it to meet surging demand for credit.
Year-Over-Year Revenue Growth Rates for Australian Fintechs
In August, the startup closed A$140 million ($104 million) in an initial equity raise. Credit Suisse's current debt investment follows participation by Credit Suisse Asset Management in that round, which included Ironbridge Capital and Canadian pension fund manager OPTrust.
By the end of 2018, the lender expects to have 90 to 100 clients and a loan book of A$90 million ($65 million) to A$100 million ($72 million), Judo co-chief executive David Hornery told The Australian Financial Review.
A huge SMB funding gap in Australia gives Judo a large addressable market to target.Australian SMBs employ approximately 5 million people — or about 20% of the country's 24.5 million population. That, coupled with their ability to drive innovation and increase competition, makes access to financing for these firms particularly important, according to the Reserve Bank of Australia (RBA).
However, the RBA also highlights that SMBs' ease of accessing finance has declined in recent years. The lending approach by the leading incumbent banks in Australia is primarily responsible for this, resulting in an SMB funding gap of more than A$80 billion ($58 billion), according to Judo.
This limited availability of lending provides Judo, which underwrites loans of A$1 million ($725,000) on average, a sizeable addressable market to target. This gap also led the government to pour A$2 billion($1.45 billion) into the SMB loan market earlier in November.
Judo's substantial financing is evidence that Australia's fintech ecosystem is developing well.
For some time now, Australia has been looking to develop its fintech ecosystem, supported by a series of government-led initiatives. Among these efforts was the introduction of a restricted banking license by the Australian Prudential Regulation Authority (APRA), aimed at increasing competition in the country's banking sector.
Although Judo has yet to receive a banking license, (it's in the process of applying), its ability to secure such a substantial amount in debt financing from a major firm within months of closing a large funding round suggests these efforts are beginning to bear fruit.
Going forward, we're likely to see healthy funding numbers for Australian fintechs, ramping up competition on incumbents in the country, as well as on regional fintech hubs like Singapore and China.