SAO PAULO – Brazil has more than 18 million active companies, according to the Federal Government’s Companies Map. Many of these businesses adopt credit cards as a way to sell more or sell over the internet. Payments with debit, credit or prepaid cards reached R$ 2 trillion in 2020, an increase of 8.2% over the previous year, according to the Brazilian Association of Credit Card and Services Companies (Abecs).
However, allowing payment in installments can create a working capital problem: the supplier needs to be paid soon, but these installments will take time to fall into the account. TruePay is looking to solve this problem, taking advantage of both the SME market and the credit card market.
Fintech allows retailers to use their credit card receivables to pay suppliers, taking care of both this connection and the credit analysis of the entrepreneurs. The idea attracted an ambitious input from heavy investors. TruePay raised R$45 million in its first fundraising. This seed round was led by the Kaszek and Monashees funds.
O From Zero To Top, entrepreneurship brand of InfoMoney, interviewed founders Luis Cascão and Pedro Oliveira about TruePay’s business model and next steps.
Credit for receivables
TruePay was created by Luis Cascão and Pedro Oliveira in December 2020. Both came from entrepreneurial families and worked in investment funds. Cascão worked at DNA Capital, while Oliveira came from Kaszek.
“We looked at the situation of our families and identified two problems. The first was working capital: having a short term to pay suppliers, but taking a long time to receive from customers. Another problem was the negligence of banks in serving small and medium-sized companies, charging high fees for lack of priority”, says Oliveira.
The entrepreneur ends up resorting to negotiation with the supplier. This provider has no experience in credit analysis and can end up in two bad situations: either it gives too generous terms and suffers from bad customers’ defaults, or it doesn’t provide any kind of facilities and loses good customers. “Our idea is to solve the problem of working capital for the entrepreneur by giving credit free of charge, while the supplier is able to sell more without worrying about credit analysis”, says Cascão.
TruePay primarily serves product retailers, which have suppliers at one end and end customers at the other. These companies need to have receivables, that is, payments to be received from credit card transactions.
The shopkeeper registers with fintech and receives a credit limit based on his capacity to generate new receivables. “Traditional credit analysis only takes into account the current ability to pay. We use data to make a projection that goes beyond current receivables and inventories, measuring its capacity to make more sales”, explains Cascão.
After having their limit defined, the entrepreneur places an order with a supplier and chooses TruePay as the payment method. TruePay then transfers ownership of the receivables from the merchant to the supplier. The retailer receives their products, and the suppliers will have these receivables as payment. TruePay monetizes itself through a discounted rate on receivables, acting as an evaluator of credit risk.
In the first half of this year, Cascão and Oliveira built the solution. TruePay actually started operating in June, with a new regulation by the Central Bank on the registration of receivables. “Before, only the acquirer could offer services on top of the merchant’s receivables. This regulation gave the store owner power over their receivables, including authorizing us to use it as a form of payment to the supplier”, says Cascão. Fintech does not disclose how many retailers and suppliers it serves today.
First institutional investment
TruePay captured a seed round of R$45 million. The seed round is usually the first institutional fundraising of a startup, in addition to the funds from the founders themselves. The amount raised by TruePay is above average, which is around US$ 1 million.
The contribution was also obtained with heavy funds. The round was led by Kaszek (who invests in businesses like Creditas, Dr. Consulta and Gympass) and Monashees (99, Nubank and Rappi), and completed by Global Founders Capital (Facebook, LinkedIn, Trivago) and ONEVC (EmCasa, Kovi) funds , Yucca).
The money will be used to improve the user experience and expand TruePay’s customer base. It will be necessary to expand the team, especially in the areas of product development and commercial. The current 30 people are expected to grow to 100 by the end of this year.
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