All over the world being an entrepreneur has its challenges and Mexico is no exception. 75% of the SMEs that are formed each year do not make it past the first two years of life and of the remaining, very few survive for five years. In general, commercial banks have closed their doors to this segment despite the fact that small- and medium-sized businesses account for 52% of the country's GDP and 72% of employment. Large banks prefer to focus on legacy segments, such as credit cards and payroll loans.
Since its founding five years ago, RD Impulsora de Negocios has focused on providing services to a group of extremely lucrative businesses with ongoing funding requirements that are disregarded by traditional players.
They have achieved a balance that is challenging to find in this industry, by using cutting-edge technology to automate many processes. This allows them to cut operating costs, while still providing each client with a personalized service that frequently goes beyond the straightforward provision of financing, such as business consulting for strategic growth.
In addition to its unique business strategy, RD's success can be attributed to its consistent ability to identify sources of finance for expansion, a fundamental resource in this sector.
RD correctly noted that there was a gap in the market for giving qualified private investors the opportunity to finance the expansion of SMEs with strong fundamentals who are prepared to supply the required collateral to significantly lower the risk of default.
This group of investors previously only had access to conventional investments like real estate, mutual funds, or paper money, where yields have been low for the past ten years.
RD has focused on lowering risk as much as possible through an origination process that took its founders more than ten years to create, despite the fact that investing in growing firms carries risk.
According to its executives, this differentiated methodology is based on five pillars, which, although logical, are rarely applied to the fullest extent in companies in the sector:
- 100% compliance with funders.
- Rigorous cash flow planning.
- Prioritization of expenses.
- Sensitive negotiation in complex times.
- Maintaining objectives and productivity in work teams.
The company has been able to maintain a group of funders who are aware that their resources are used for the expansion of successful projects in a transparent manner, thanks to the extreme transparency with which the company's finances are managed and the closeness with its funders, who have benefited from an annual rate of return close to 20% throughout its five years of existence.
Due to recent issues, that some of the larger players in the non-banking financial sector have had, competitors like RD, who chose not to compromise the quality of their loan portfolio for quick expansion, will have an easier time maintaining a steady and safe pace.
We shall keep an eye on this disruptive force's development in Mexico.