Small and medium-sized businesses regularly face cash flow problems. But while this is an already embarrassing situation, it has been exacerbated to the breaking point for too many people during the Covid-19 pandemic. Today, a UK startup called MarketFinance – which has built a lending platform to help SMEs stay afloat during these tougher times – announces a large infusion of funding of £ 280m ($ 383m ) as she prepares for a new wave of loan applications.
“It’s a good time to lend, at the start of the business cycle,” CEO and founder Anil Stocker said in an interview.
Funding comes primarily in the form of debt – money loaned to MarketFinance to in turn lend to its clients as an approved partner of the UK Government’s Recovery Loan Scheme; and £ 10million ($ 14million) is equity that MarketInvoice will use to continue improving its platform.
Italian bank Intesa Sanpaolo SpA and an unnamed “global investment firm” provide the debt, while the equity portion is led by Black River Ventures (which also backed Marqeta, Upgrade, Coursera and Digital Ocean) with the participation of the existing funder, Barclays Bank PLC. Barclays is a strategic investor: MarketFinance powers the bank’s online SME lending service. Other investors in the startup include Northzone.
We understand that the company’s valuation is somewhere in the region of less than $ 500 million, but over $ 250 million, although officially it doesn’t release any numbers.
Stocker said MarketFinance has been profitable since 2018, one of the reasons it hasn’t given up a lot of equity in this current funding tranche.
“We are building a sustainable business, and the equity we raised was aimed at unlocking better debt at better prices,” he said. “It can help show more equity on the balance sheet. He said the money would “go to our reserves” and be used for new product development, marketing and to further develop its API connectivity.
This latest development is important: it harnesses the great wave of ‘integrated finance’ games that we see today, where third parties are offering loans to clients on their own platforms – with the loan product powered by MarketFinance, similar to what Barclays is doing. currently. The range of companies that operate this is potentially as wide as the Internet itself. The promise of integrated financing is that any online brand that already does business with SMEs could potentially offer these SMEs loans to… do more business together.
MarketFinance came into being several years ago as MarketInvoice, with its basic business model focused on providing short-term loans to a given SME against the value of its unpaid invoices – a practice commonly described as the financing invoices. The idea at the time was to solve the most immediate cash flow problem faced by SMEs by taking advantage of the thing (unpaid invoices, which would usually end up being paid, but not immediately) that caused the cash flow problem. in the first place.
Much of the financing that SMEs get against invoices, however, is primarily in the realm of working capital, helping businesses with their payroll and their own monthly bills. But Stocker said that over time, the startup could see a greater opportunity by providing funding in larger sums and covering more ambitious business expansion goals. That was two years ago, and MarketInvoice was renamed MarketFinance accordingly. (He still offers the product a lot based on the invoice.)
The timing turned out to be fortuitous, although the reason was certainly not lucky: Covid-19 has arrived and has completely changed the way the world works. SMEs have been at the edge of this corner, not least because of these cash flow issues and the fact that they are simply less oriented towards diversification and pivoting due to changing market forces due to their cut.
It turned out to be a great opportunity for MarketInvoice.
Stocker said the early part of the Covid-19 pandemic saw the bulk of loans taken out to handle business disruptions due to Covid-19. Interruptions can mean business closures, or simply customers who no longer come as before, and so on. “The big theme was frictionless access to finance,” he said, using technology to better and faster assess applications digitally without “any meeting with bank managers” and reducing response time to a few days compared to the 4 to 6 weeks typical of SMEs. traditionally expected.
If last year was more about ‘panic, bolstering or pivoting,’ in Stocker’s words, ‘we are now seeing a group of them struggling with supply chain issues, exacerbations of the Brexit and labor shortages. It’s really hard for them to deal with all of this.
He said the number of loan applications has exploded, so there is no shortage of demand. He estimates monthly loan requests to have reached $ 500 million, a huge sum for a small startup in the UK. He is selective in what he lends: “We choose to support those who we thought would return the money,” he said.