Alt Lending Without The Marketplaces

In any business endeavor, working capital is a form of oxygen. Working capital allows firms to buy parts, pay workers, ship products and wait for payment with a cushion of funding in place that can help meet unforeseen events. Cash inflows and cash outflows never quite jibe exactly so that a business can thrive solely on day-to-day operations.

In some markets, however, working capital is hard to come by, and linking up the links of a given supply chain with surety becomes a bit tenuous. That’s especially true in one segment, the middle market, where supply chain finance can mean a world of difference in cementing those disparate links.

TradeRocket CEO Jim Eckstein — whose firm uses technology to bring larger firms into financing and payables arrangements with their suppliers, often smaller firms — recently spoke with PYMNTS about his business and the changing payments ecosystem. “TradeRocket deals primarily in what we call B2B payments … buyers and suppliers, the interactions of the supply chain,” he told PYMNTS. “It’s very interesting to understand how technology and the thoughts occurring today on the consumer side. What we find is that what happens on the consumer side moves to the B2B side relatively shortly thereafter.” In short, the widgets that are in use today by consumers as they interact with technology, said the CEO, then eventually become useful in B2B transactions.

With the potential to serve the mid market, which Eckstein described as firms with $25 million to $500 million in revenues, he detailed the niche occupied by TradeRocket, thus: “We wrote a program that connects buyers and suppliers and puts a funder in between them to support increased working capital for both.”  The fact remains, according to Eckstein, that the mid market is underserved, as would-be funders “do not quite understand the risks” tied to that marketplace.

Certainly the opportunity is a large one for TradeRocket and supply chain financing in general.  In past conversations with PYMNTS, the executive pointed out that the targeted market, with 18,000 buyers in the United States alone, with $5 trillion in spend that is dispersed across 18 million suppliers.  Recently, the firm announced a deal with Hitachi Capital America Corp. to provide working capital through supply chain financing.

“Large companies like Walmart, or Target,” he told PYMNTs in his most recent interview, “they buy from suppliers in the mid market. The mid market has to figure out how to sell to someone like Target … Target doesn’t have to figure out how to buy from a smaller supplier, and that forces the supplier to a greater, innovative thought process to figure out how to deal with this huge behemoth ‘to get my product to someone and to sell my product.’”

What lies ahead for the next 12 months?  According to Eckstein, “if we can facilitate that innovation in the mid market through getting that business an increase in working capital, we believe we can lift the economy … in a win-win for everybody” that can help create jobs and opportunities in firms that need capital to grow.