India’s Klub close to striking deals with UAE, Saudi investors for $275mn Middle East SME funding

The Indian financing platform worked on the funding deals with investors in the region following it was granted approval by the Financial Services Regulatory Authority (FSRA) of ADGM for managing credit funds

India-born revenue-based financing platform Klub is close to striking deals with some of the leading funds and investor groups in the UAE and Saudi Arabia to raise funds for its proposed close to $275 million (AED1 billion) corpus for credit financing of SMEs (small and medium enterprises) and startups in the region, its top executive told Arabian Business.

The names and funding sizes, however, were not disclosed because of confidentiality issues.

“We’re in active discussions with some key investors in the UAE and in Saudi Arabia that have reached a mature stage,” Anurakt Jain, co-founder and CEO of Klub, told Arabian Business.

“We can’t comment on the size yet,” he said.

The Klub top executive also disclosed that besides the Middle East investor groups, the company is also in touch with investors across the globe for the $275 million funding corpus.

Klub worked on the funding deals with investors in the region following it was granted approval by the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Markets (ADGM) for managing credit funds.

The platform was granted a nod for Category 3C license under the newly instituted credit fund regime by the FSRA.

The funding deals are aimed at accelerating Klub’s efforts to set up its AED 1 billion credit umbrella, focusing on investing in credit products for the growth of SMEs and startups in the Middle East region.

Jain said Klub will also be raising capital from lending partners across the Middle East, including family offices and high net worth individuals (HNIs).

“Family offices in the Middle East have grown rapidly recently – their AUM (assets under management) forecasted to escalate by 46 percent by 2025 – which shows a great potential for Klub’s credit fund from a supply point of view,” he said.

It targets $250bn credit gap in SME-startup financing.

Klub is making an aggressive expansion into the UAE – and also into the wider Middle East region – eyeing the estimated $250 billion credit gap in corporate financing in the region, especially for funding of SMEs and startups.

Despite a surge in entrepreneurship, leading to establishment of as many as 557,000 SMEs and 27,000 startups, including 9 unicorns, by mid-2022 in the UAE alone, access to capital remains a major challenge for the sector.

Industry estimates show SME lending in the whole GCC region at a paltry three percent of the total financing.

This is even as the number of SMEs and startups is forecast to reach 1 million by 2030, driven by strong government support to expand the non-oil sector, creating a favourable business environment for growth of such units.

“There is a need now – more than ever – to support the sector by widening the offerings and financial instruments available to SMEs to cater to their unique financing needs,” Jain said.

Klub’s financing model different from that of banks, FIs. Jain said Klub’s credit financing will be different from that of traditional banks and financial institutions as it is fast – it will aim to disburse the amount in as less as 48 hours after the brand signs up on its platform.

“We will also be providing financing without any equity dilution [by SMEs or startups], provide a large ticket size (up to AED2 million in a single tranche), follow a paperless and fully digital process and have flexible repayment cycles based on the brand’s revenue.

“This gives the brand and the founder the flexibility to run their business without worrying about working capital,” Jain said.

Klub will also provide the provision of raising multiple rounds after a 45-day period from the first round, which gives access to the founder to raise capital as per their business need with absolute ease and freedom.

The Klub co-founder, however, said in a fintech universe it is important to partner with different institutions, and hence Klub will also aim at partnering with banks and FIs for helping startups and SMEs bridge the credit gap in the region.

He said the platform will follow a sector-agnostic approach for extending funding.

“Any business having recurring revenue is eligible to raise funds through the platform.”

Jain said a key aspect of Klub’s credit offering will be the revenue-based financing model, which will enable a flexible repayment model.

“This model fosters a mutually beneficial relationship where our success is tied to that of its clients.”

Jain exuded confidence that the substantial financing ceiling – AED2 million per venture – combined with the platform’s innovative financing approach will position Klub as a transformative force in the UAE’s SME ecosystem, driving economic growth and prosperity.

Jain also disclosed that Klub has plans to expand into 3-4 countries in the Middle East, though it would be focussing on the UAE and Saudi Arabia initially.

Read more on Arabian Business.