If banks are hesitant to lend to SMBs and working capital is a key determinant of how firms can survive a cash crunch or scale into growth, covering everything from equipment breakdowns to late payments to new business ventures, the opportunity is open for alternative finance providers.
One firm, Crossflow, which delivers supply chain solutions, recently announced what it termed a “significant investment” from Calibrate Management. Under the terms of the deal, Calibrate is taking a minority stake in Crossflow.
In an interview with PYMNTS, Crossflow CEO Tony Duggan said that access to working capital remains top of mind for smaller firms and even larger corporates. And operating as an EDI, with peer-to-peer functionality (where pools of capital are put up by investors), allows for quicker access to capital at speeds unlikely to be matched by banks with paper-based applications and multi-step processes.
The company has a slightly different model than might be seen even in the alternative lending space as Crossflow’s direct customer remains the larger corporation, which is serviced by the supplier, and as such usually has significant payables in place. Duggan told PYMNTS that there’s an additional benefit here, as Crossflow “relies on the creditworthiness” of these larger firms and, in terms of scale, he noted that the corporate network sees “about $4 billion in payables” annually.
The larger corporates, said Duggan, can have as many as 200–300 suppliers or even more, which can translate to a steady stream of demand across verticals and links in a given supply chain (via corporate lists of suppliers vetted and confirmed through KYC documentation and other conduits).
The supplier invoice, presented via cloud on the company’s platform, can then be paid by investors with speed to funding and with an attendant discount in place. Quick access to capital, when it is needed and through piecemeal presentation of invoices, can also, as Duggan noted, help strengthen a supply chain. The suppliers themselves ensure that quality goods and services are provided (they need to be paid, after all), and corporates have the ability to gain a bit more insight into the financial strengths of individual players in their supply chains.