If scale is important in finance, so is it ever the case with FinTech. Scale enables lenders and borrowers to come together for profits on the one hand and capital (and sometimes working capital) on the other.
One firm, MarketInvoice, a peer-to-peer platform focused on, as the name implies, invoice financing, is seeking scale. The headline number is an ambitious one, as the firm is targeting a doubling in size in terms of lending, to as much as £2 billion this year.
That comes off a base of £1 billion, which, as CEO Anil Stocker told PYMNTS, represents a level that took the firm about four-and-a-half years to reach. The model is changing a bit, the executive said, and is, in fact, expanding, as the company debuted its MarketInvoice Pro earlier this month. With that new offering, MarketInvoice pushes beyond its unpaid invoice-by-invoice financing, on an individual basis. With that model, investors extended money to smaller firms, and now, said Stocker, lending can consider, embrace and lend against a firm’s entire book of unpaid invoices, extending a line of credit.
The demand is there, in the U.K. market at large, said CEO, as credit is still a bit hard to come by and as traditional lenders still are skittish to lend to firms — and do so with paper-based documentation and time-consuming processes. This means that firms may not get the capital they need, when they need it, to meet expenses or fund growth.
And yet, in terms of risk, said Stocker, speaking of the industry in general, “invoice financing is a powerful tool … and receivables [and the invoices tied to them] are among the biggest assets a firm can have.” The problem, he continued, is the reliance on the traditional cash-based model, with its attendant 30-day, 60-day or even 90-day payments flow, which may not be timely enough for SMBs.
Stocker told PYMNTS that the new MarketInvoice Pro offering traces its genesis to the seasonal nature of some firms’ business (with its ebb and flow of invoices) and growing familiarity of clients with invoice financing in general. By lending against the book of business, some of that seasonality could be smoothed, and in addition, said the CEO, investors could offer up “much larger amounts of capital.” Private investors can lend up to 80 percent of the invoice (or aggregated invoices’) value. This can help fill a void left by the banks. The executive told PYMNTS that the turnover of the firms eligible for this credit line generally will come in at £2 million annually. The platform integrates with accounting software, and the process is intuitive online in a few hours, versus banks that can take three to four months. In addition, he termed the traditional lending model via banking, with fees and rates (and deceptive APRs), along with personal guarantees, as “opaque.”
The rollout of the Pro product, said Stocker, comes as the region grapples with late payments, which he said “must be differentiated from long payment terms,” such as those employed by firms like Amazon, where 60 days to 90 days may be the norm. And invoice financing is indeed catching on, as data offered by the Asset Based Finance Association has found that $943 million of such finance was extended to SMBs in just the first three months of this year, up 63 percent from last year.