Arex, the invoice financing startup focused on the small and medium-sized business market, has raised €3 million in funding.
According to a report by TechCrunch, the capital raise was led by Finland’s Lifeline Ventures. Also partaking in the round was London-based LocalGlobe and unnamed angel investors.
Arex, which is available in Finland, with plans to expand into the U.K. in the beginning of 2017, is aiming to provide SMBs with another way to access short-term financing. According to TechCrunch, Arex has created a live, automated and algorithmic heavy trading exchange that enables small and medium-sized businesses to set the discount at which they are willing to sell an outstanding invoice. Investors bid in real time. Arex charges 0.25 percent per invoice that is financed.
“We solve cash flow problem of SMBs by creating a live, automated and algorithmic-based trading exchange where companies can set their own prices for their invoices,” said Arex Cofounder Perttu Jalkanen in an interview with TechCrunch. “Arex is enabling both SMBs and the larger corporates who use us to instantly turn their unpaid invoices into cash.”
The way Arex sees it, it entered the market at an ideal time when a host of small and medium-sized businesses are struggling with their liquidity issues. It's happening now more so than ever before because measures have been put in place to strengthen regulations, and increased risk management has resulted in banks having less money available to lend to businesses. This is happening at the same time that small and medium-sized businesses are moving away from buying fixed assets, like real estate, and opting more for leasing of products and services, which puts further pressure on working capital.
“For SMBs, Arex offers total control over the terms of their financing,” noted Jalkanen in the report. “Meanwhile, because modern technology enables the automation of many processes such as credit ratings, collection and accounting, the cost savings can be passed onto participating companies and investors.”