Sycamore, a digital lending platform based in Lagos, Nigeria, is making waves with its latest funding endeavors. The company is currently in the process of raising ₦1 billion ($628,000) to complete a $1.5 million debt funding round. This initiative comes hot on the heels of Sycamore securing ₦1.5 billion ($943,000) in debt from Cascador, an entrepreneurship accelerator based in Nigeria.
The decision to raise additional capital stems from the increasing demand for credit among individuals and businesses alike. With plans to expand its loan book significantly, Sycamore aims to cater to the needs of its growing user base effectively. In 2024 alone, the company disbursed over $5.5 million in loans and generated revenue exceeding $3.5 million.
“We saw an increase in loan demand. Our traditional method of financing wasn’t keeping up,”
explained Babatunde Akin-Moses, CEO of Sycamore, highlighting the necessity for seeking alternative funding avenues such as debt financing.
Established in 2019, Sycamore specializes in offering working capital loans ranging from ₦500,000 ($314) to as high as ₦20 million ($12,500) for businesses. By opting for local debt funding options like the one provided by Cascador at rates 10% lower than the market average, Sycamore can strategically scale its operations without compromising equity.
“Debt allows us to grow the loan book without giving up equity,”
emphasized Akin-Moses when discussing the advantages of leveraging debt instruments for business expansion.
In light of economic reforms and rampant inflation causing fluctuations in currency values—such as the naira losing 75% of its value over 18 months—raising funds locally becomes a strategic move that shields companies like Sycamore from currency risks associated with dollar-denominated debts.
Moreover, by structuring deals using local currency instead of dollars—an approach increasingly adopted by Nigerian startups—businesses can mitigate potential repayment challenges linked to volatile exchange rates.
“The Cascador deal was initially supposed to be $1 million… Eventually we all agreed to structure the deal in Naira,”
revealed Akin-Moses regarding their foresight in navigating potential currency fluctuations that could impact repayment obligations significantly.
If successful in raising ₦1 billion through debt financing—a strategy embraced by an increasing number of startups across Africa—the move will position Sycamore among a cohort tapping into diverse funding sources beyond traditional equity investments. In fact, data indicates that a notable portion of startup fundraising across Africa now emanates from debt instruments rather than purely equity rounds—a testament to evolving financial strategies within the entrepreneurial ecosystem on the continent.
As Nigerian startups like Sycamore pave new paths through innovative financing mechanisms tailored to local contexts and challenges posed by economic dynamics and market conditions—funding journeys unfold with strategic foresight ensuring sustainable growth trajectories amidst a rapidly evolving landscape.
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