Invoice Financing, Real-Time Cash Flow Forecasting Bring Relief to Struggling UK SMEs

The past 18 months have been a period of “unbelievable stress” for small- to medium-sized business (SMBs) owners in the U.K., according to Ann Marie Juliano, founder and CEO at London-based business finance startup Muse.

Because the U.K. FinTech connects to software systems and SMBs’ bank accounts to generate real-time visualizations of data, Muse has real-time information on clients in terms of how they are performing financially at a given time, and even compares that information to previous months or quarters.

According to Juliano, that analysis presents an extremely bleak outlook of the SMB market.

“[Businesses are] coming out of a time that was stressful and uncertain and are now being smacked in the face with another massive energy crisis,” she told PYMNTS in an interview, adding that by next April, energy prices in the U.K. are expected to increase to 3x their current size.

Related: UK’s 10% Inflation Rates Stretch Consumers’ Paychecks and Patience

In fact, the Bank of England (BoE) estimates that the rise in energy bills will drive inflation above 13% this fall, and has further predicted that the country will enter a recession in the fourth quarter of 2022.

That’s all coming at the wrong time for small and medium-sized entrepreneurs, she said, most of whom couldn’t generate money during the pandemic and had to divert resources into keeping their businesses afloat.

Read more: UK Government to Pay Out $43.6B to Support Households

“That period wasn’t a story of growth. For them, it was a story of survival,” she pointed out. “So to finally come out of that and be hit with an exorbitant amount of expenses on the other side is just one tidal wave after another.”

A Supply-Invoice Financing Fix

Prior to the pandemic, SMBs were already reeling under the impact of Brexit.

For Muse’s 4,500 clients, it reflected in the slowdown of invoicing and difficulty in managing their cash flows, as shipment of goods to the U.K. have been hit with significant delays, increasing from four to six weeks to two or three months today.

This is where the firm’s trade financing solution — focused on SMBs generating between £200,000 and £20 million of turnover — has come in handy, filling a gap in the market left by the traditional banks that primarily overlook SMBs.

With supply finance, Muse helps provide credit facilities to business buyers who lack the necessary liquidity to complete transactions with global suppliers in China, India and Europe. And with invoice finance, Muse can also facilitate the repayment of supply financing by giving customers access to 90% of the value of their invoices within 24 hours.

See also: Muse Launches Supply/Invoice Financing Product

Per Juliano, the U.K. company has also partnered with a foreign exchange (FX) company to purchase goods at a fixed FX rate for its clients, giving customers some additional breathing space during shipment delays.

In a tough economic environment, that certainty of cash flow ends up being a huge relief to business owners who do not have a lot of cash on hand to pay suppliers’ deposits upfront.

“We finance [the goods] for 120 days. Usually, that is enough time for them to bring the goods in, sell them and then be able to pay us back,” she explained.

Frictionless, Embedded Finance

From bank-controlled offline lending to online lending, there’s been another shift in the current trend around embedding financial services into apps, sites and ecosystems. Keeping up with the times, Muse also launched its embedded finance program this year.

“From a client user perspective, not having to go to multiple sources to get the finance is great,” Juliano said. “[And] from a business owner’s perspective, my perspective, it’s fantastic because we’re working with large corporates that already have an established network and [access to] interesting clients that we can work with.”

Learn more: SMB FinTech Muse Finance Raises $20M

In the meantime, with the $20 million it recently raised, the company is looking to accelerate international expansion plans, first by launching in Ireland this fall before targeting the U.S. market in the next 12 to 18 months.

“Then the goal for the business is listing in the next four years, so we’ve got a lot of work ahead of us,” she added.

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