Small businesses require loans to stay afloat. We’re not talking about to stay alive but to float from the time they need the money up to the time they generate money to repay the loan. This is a very sensitive and crucial time for the majority of small businesses. In fact, traditionally, this gap in time between the time a company needs a cash infusion for materials and operating costs and the time it recovers that money to revenues determines whether the company stays alive. As you can well imagine, there’s a lot of need for a company that can facilitate loan floats for small businesses.
As we have mentioned earlier, venture capital funds tend to love technology companies that help businesses do business with other businesses. There’s a lot of appeal to the B2B platform because first of all, there’s a lot more money involved and second, there’s a higher chance of revenues so there’s also a larger scale and just as importantly, it’s not considered as fickle and vulnerable to changing tastes and fashions as consumer companies. For all these reasons, it made all the sense in the world that Zazma has raised around $10 million for its small business funding portal.
This is how Zazma works. A small business goes to the portal and signs up and asks for a small loan. The business will itemize what it will need the loan for. Zazma then uses its technology to assess the risks of that small business and makes a decision. If it decides to extend a loan, Zazma will actually pay the supplier directly. The small business doesn’t get the money to pay the supplier. In other words, Zazma stepped in as a middle man but the small business is on the hook to pay the supplier. This is a great business model because it’s not only efficient and simple but it’s also very direct. In other words, there’s no money that changes hands that can be diverted, lost or wasted. It’s an easy to track system and more importantly, it puts Zazma in a role where it can have a greater voice regarding how its funds are spent and more notably how to track its funds.
Obviously, these strategic advantages have paid off for Zazma and it has racked up $10 million in its first round of funding. Zazma is based in Israel and New York and its funds came from Spark Capital Sequoia Capital. It should be very interesting how this technology matures and helps small businesses. We all know this type of service is definitely needed and could mean life or death for many small enterprises.