By Guglielmo de Stefano on Thursday 18 February 2016
In a recent article, AltFi investigated what’s happening in the Alternative Finance Market in Australia. What emerged is that the AltFi revolution seems to have started approximately when Matt Symons and Greg Symons founded SocietyOne in 2012, the first fully compliant peer-to-peer lending business in the country.
That research focused mainly on peer-to-peer lending and equity crowdfunding. Although these two subsectors are key pillars of the broader alternative finance spectrum, we believe that invoice financing also deserves the same attention.
First and foremost, it’s crucial to state the difference between invoice financing and invoice factoring, as they aren’t the same thing at all.
The former refers to borrowing money against businesses’ outstanding accounts receivables. An example helps to clarify the point. A lender gives entrepreneurs cash today in relation to the value of the company’s accounts receivables – money owed to the firm, which clients will pay in the future (hopefully). Once the clients pay up, entrepreneurs then repay the lender the amount loaned plus fees and interest.
The latter is a bit different. Indeed, in this case the lender “buys” the accounts receivables entrepreneurs are owed and takes over collecting from the clients. With invoice factoring, the lender will pay the business owner a percentage of the total outstanding invoice amount, then takes responsibility for collecting the full amount. Once they collect the full amount, they’ll advance entrepreneurs the difference, keeping a percentage for their services.
The main difference between these two forms of financing is obvious. In the first case, the business owner is still responsible for collecting outstanding money owed by his/her clients. In the second case, clients will deal with the factoring company to make their payment, not the business owner.
In Australia, from what we can establish, the top 5 Australian invoice financing/factoring platforms are Waddle, Marketlend, Timelio, FundX and InvoiceX.
Waddle: Founded in July 2015 by Leigh Dunsford and Simon Creighton – owners of invoice factoring company Trade Advance – Waddle is an invoice financing platform, which has provided about 20 Australian SMEs with approximately $1 million in financing to date. In a recent interview, Leigh was keen to highlight that Waddle is no ordinary invoice factoring company. The platform offers a solution similar to factoring in some ways, but very different in others. As with factoring, Waddle provides funding against small businesses’ outstanding invoices. Unlike factoring solutions, businesses’ clients are never contacted or hassled by Waddle and entrepreneurs are able to skip on the paperwork headaches that historically plague the factoring process. To find out more about Waddle click here.
Marketlend: Founded in December 2014 by Leo Tyndall and Paul Roffey, Marketlend was conceived as a business peer-to-peer lender, offering loans to businesses in the form of working capital, traditional business loans and commercial property finance. Its offering includes three products: a debtor finance product, an invoice financing solution and a trade finance service. In the case of invoice financing, loans are secured by a personal property interest over the borrower’s company and the platform owns the supplies as it pays for them; in the case of the debtor finance offering, they are secured against the borrower’s accounts receivable. To find out more about Marketlend click here.
FundX: Based in Sydney, FundX was founded by David Jackson – former Australian small business builder and investor. According to him, the primary aim of the company is to connect businesses with investors who can fund their cash flows. Users are provided rapid access to funds based on the value of their outstanding invoices. FundX uses big data, machine learning and predictive algorithms to analyse risk and authorise invoice funding “with the push of a button, in less than a minute”. To find out more about FundX click here.
InvoiceX: Founded by Dermot Crean and Steve Yannarakis, the company is strongly placed to help small and medium enterprises (regardless of their business sector) to deal with working capital pressures. Its primary product – the Match Maker Trading Platform – rapidly matches investors with businesses, optimising the deal for both parties. InvoiceX assures the total absence of set-up fees and a straightforward application process. The company aims to provide a cash advance – up to 85% of the Face Value of an invoice – within 24 hours. To find out more about InvoiceX click here.
Timelio: Founded in 2014, Timelio – formerly known as InvoiceBid – enables businesses to raise short-term finance by selling their unpaid invoices directly to a network of investors. The platform requires investors to fund their accounts with a minimum of $25k. Before being approved to sell invoices on the platform, all invoice sellers undergo a rigorous credit assessment. The platform states that third party analytics and searches might be used to further support the internal assessment. Before being made available for investment, each invoice and debtor will be verified and authenticated. Timelio has been recently awarded the “Game Changer of the Year Award” sponsored by Visa and the “Overall Award for Outstanding Excellence” sponsored by Optus at the OPTUS My Business Awards in Sydney. To find out more about Timelio click here.
If you want to know more about the alternative finance space in Australasia, be sure to book your tickets for the AltFi Australasia Summit 2016 before they sell out.
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