KONFIO

David Arana was trading structured products at Deutsche Bank in New York. Good job, wrong itch.

He kept thinking about the millions of small businesses back home in Mexico that could not get credit. Banks there wanted years of paperwork and collateral most shop owners did not have.

In 2013 Arana went home and teamed up with Francisco Padilla to start Konfio. The idea was to use data instead of paperwork.

Look at a business's real numbers, decide fast, and get money into its account in days.

At its core Konfio makes money the way a bank does. It lends to small businesses and earns interest on the loans.

The trick is speed and data. Instead of demanding years of statements, it pulls a business's transaction and tax data, scores it with software, and can approve a loan in days.

Over time it added more ways to earn. A business credit card, payment tools, and management software.

But the engine is still lending to small firms the banks pass on, at a rate that covers the extra risk.

The flagship is the small-business loan. Fast working capital, approved with data instead of piles of paperwork.

On top of that sits the Konfio business credit card, aimed at owners who never qualified for one from a bank. There are payment tools so businesses can take card payments, and management software to track sales and invoices.

Bundled together, the pitch is a full financial toolkit for a small Mexican business, not just a one-time loan.

Konfio grew by going after a market nobody else wanted. Mexico has millions of small businesses and most cannot get a proper bank loan.

Konfio used data to say yes quickly and cheaply where banks said no. Then it widened the relationship.

Once a business borrowed, Konfio offered it a credit card, payment tools, and software to run the shop. It also bought other companies to add those pieces faster, folding in payments and business software firms.

The plan was to become the one account a small business actually uses.

Lending to small businesses is risky by nature. Many of Konfio's borrowers are informal shops with thin records, so if it reads the data wrong, defaults pile up fast.

That risk got scarier when interest rates rose and the economy wobbled after 2021. Funding the loans got more expensive at the same time.

Konfio has to price risk exactly right. Charge too little and losses eat it alive.

Charge too much and the small businesses it serves cannot afford to borrow.

Konfio raised money from some of the biggest names in emerging-market fintech. QED Investors and Kaszek Ventures, two of Latin America's top venture firms, backed it early.

SoftBank's Latin America Fund put in around $100 million in 2020. The 2021 round that made it a unicorn was led by Tarsadia Capital.

The International Finance Corporation, part of the World Bank, and Goldman Sachs provided debt to fund the actual loans. That mix of equity and debt is exactly what a lender needs.