Small and medium-sized businesses regularly face cash flow problems. But if that is an already inconvenient problem, it has been exacerbated to breaking point for many during the Covid-19 pandemic. Now a UK startup called MarketFinance , which has created a lending platform to help SMEs stay afloat in those lean times, announces a huge injection of funding of £ 280 million ($ 383 million) as it prepares for a new wave of applications of loans.
“This is a good time to make loans, at the beginning 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. Recovery loan plan; and £ 10 million ($ 14 million) of that is capital that MarketInvoice will use to continue improving its platform.
The Italian bank Intesa Sanpaolo SpA and an anonymous “global investment firm” are providing the debt, while the equity portion is led by Black River Ventures (which has also backed Marqeta, Upgrade, Coursera and Digital Ocean) with the participation from the existing sponsor, Barclays. Banking PLC. Barclays is a strategic investor: MarketFinance powers the bank’s online SME loan service. Other investors in the startup include Northzone.
We understand that the valuation of the company is somewhere in the region of less than $ 500 million, but more than $ 250 million, although it does not officially reveal any figures.
Stocker said MarketFinance has been profitable since 2018, one of the reasons it did not give up much capital in this current tranche of funding.
“We are building a sustainable business and the capital we raised was to unlock better debt at better prices,” he said. “It can help put more capital on the balance sheet.” It said the money “will go into our reserves” and will be used for new product development, marketing and to continue building its API connectivity.
That latest development is important: it takes advantage of the big wave of “integrated finance” games that we are seeing today, where third parties offer, on their own platforms, loans to clients, with the loan product powered by MarketFinance, similar to what Barclays ago. currently. The range of companies that take advantage of this is potentially as vast as the Internet itself. The promise of integrated finance is that any online brand already doing business with SMEs could offer loans to those SMEs to … do more business together.
MarketFinance was born several years ago as MarketInvoice, with its basic business model focused on providing short-term loans to a given SME against the value of their unpaid invoices, a practice typically described as invoice financing. The idea at the time was to solve the most immediate cash flow problem that SMEs face by taking advantage of the thing (unpaid bills, which would generally be paid over time, but not immediately) that caused the cash flow problem in the first place. .
However, much of the financing that SMEs obtain from invoices is mainly in the realm of working capital, which helps companies make payroll and pay their own monthly bills. But Stocker said that over time, the startup could see greater opportunity in providing financing for larger sums and meeting more ambitious business expansion goals. That was two years ago, and MarketInvoice changed its name to MarketFinance. (The invoice-based product still offers a lot.)
The timing turned out to be fortuitous, even if the reason has definitely not been lucky: Covid-19 arrived and completely nullified how much the world works. SMEs have been on the brink of that gap, mostly due to cash flow issues and the fact that they are simply less diversification and spin-oriented due to changing market forces due to their size.
It turned out that this presented a great opportunity for MarketInvoice.
Stocker said the early part of the Covid-19 pandemic saw most of the loans that were taken out to manage business disruptions due to Covid-19. Disruptions can mean business closures, or they can simply mean that customers no longer come as they used to, and so on. “The big issue was frictionless access to finance,” he said, using technology to better and more quickly assess applications digitally without “meetings with bank managers” and reducing response time to business days. typical 4-6 weeks that SMEs would have. traditionally expected.
If last year was more about ‘panic, prop or twist’, in Stocker’s words, ‘now what we’re seeing is a bunch of them struggling with supply chain problems, Brexit exacerbations and hand shortages. working. It’s very difficult for them to handle all of that. “
He said the number of loan applications has skyrocketed, so there is no shortage of demand. He estimates that monthly loan applications amount to $ 500 million, a huge sum for a small business in the UK. It is selective in what it lends: “We choose to support those we think will pay back,” he said.