Fintech startup Qwil raises $24.4 million in equity and $200 million in debt

NEW YORK (Reuters) - Qwil, a startup that provides financing to freelancers and small businesses, has raised $24.4 million in equity and $200 million in debt funding from investors including Jefferies Financial Group Inc, the company said on Wednesday.

The equity round was led by venture firm PeakSpan with participation by Mosaik Partners, Reciprocal Ventures, Silicon Valley Bank, Cantos, Sam Hodges, and Prosper President Emeritus Ron Suber.

The San Francisco-based company will use the cash injection to grow the business by making new hires and increasing the pipeline of individuals and small businesses it lends to, Johnny Reinsch, CEO and co-founder of Qwil, said in an interview.

Reinsch came up with the idea for the company after he had nearly defaulted on his mortgage in 2014 when he was freelancing and a client had not paid him on time, he said. Having been denied financing from his bank, Reinsch had few options other than high-interest and predatory loans, he said.

He co-founded Qwil in 2015 to help provide a solution for others faced with a similar problem, he said.

The company works with on-demand and freelancer marketplaces to enable them to offer their workers access to payments earlier rather than when their invoices are due.

Like some other fintech lenders, it does not rely on traditional credit scores to make its underwriting decisions, but uses alternative data, such as payment information. This helps keep its costs down, Reinsch said.

“We have been able to price this very competitively given the price doesn’t rely on FICO scores,” Reinsch said.

Qwil’s flat fee for the advance pay equates to a 20% rate on an annualized basis, he said.

The company can send payments to 140 countries in all major currencies and says that it can help marketplaces attract better freelancers by giving the earlier access to pay.

Qwill is one of a growing number of young companies taking advantage of technology to offer more user-friendly and cheaper financial services to consumers and businesses than banks and other traditional providers.

“We’ve partnered with Qwil in their mission to provide fair alternative financing to those typically underserved by the financial industry - contractors and small businesses,” Brian McGrath, head of principal finance and fintech investing at Jefferies, said in a statement.

Qwil has advanced more than $150 million in pay through its platform so far, with nearly half of the customers using its services consistently after their first transaction, it said.

Reporting by Anna Irrera; editing by Nick Macfie