MarketInvoice coverage in ‘Raise money through Crowdfunding: Accessing new sources of finance online’
Raise money through Crowdfunding: Accessing new sources of finance online
PUBLISHED 17TH JULY 2012
To read the online version click here
Introducing Invoice Finance:
MarketInvoice is an online invoice auction platform for small business – an ‘eBay for invoices’ in simple terms. Businesses can register on the website, and then auction their invoices due. Institutional investors then compete online to provide funding at the lowest cost. Since February 2011, MarketInvoice has advanced £20 million to a host of SMEs in a wide variety of sectors.
- You don’t give away a stake
- You retain control
- Potentially lower interest rate due to auction system
- Only available to those with large clients
- Good credit rating needed
- More complex than straight debt or equity
Johnny Walker, co-founder of specialist recruiter Magnus Walker & Partners, went for MarketInvoice to remedy the problem of late-paying customers.
What is your cash flow issue?
More than two-thirds of our revenue comes from placing senior level interims, some of whom are paid around £1,000 a day, and at the end of the month our interims expect to be paid on time. That means our financial exposure can be in excess of £20,000 a month per interim. Meanwhile our clients will typically pay us six weeks late so we need credit on demand.
Why did MarketInvoice work better for you than a conventional invoice financier?
[Because of the online bidding process] the cost of credit is quite low and we’re not locked into any commitment. Also, some invoice financiers demand the entire debtor book to be financed but MarketInvoice is more flexible there.
Finally, sometimes small businesses don’t have the financial accounts to get factoring finance anyway. You often need three years of accounts, director’s guarantees and a good credit profile.
Anil Stocker, Co-founder of MarketInvoice
Marketlnvoice allows fast-growing small businesses to overcome the long payment terms insisted upon by large customers. Anyone with a big client will be familiar with this — waiting up to 90 days before you have access to the fee you have earned. Long waits can mean difficulty in growing quickly, seasonal cash flow problems and difficulty paying suppliers. As a small business owner myself, I know what a nightmare that can be.
The way it works is you register with us on the MarketInvoice website, and then auction your invoices due. Big institutional investors — hedge funds, family ofﬁces, high net worth individuals — then compete online to provide funding at the lowest cost.
I’m often asked what the difference between us and a traditional factoring provider is. While our model bears a resemblance to traditional factoring, we have no long waits, no monthly fees, no collateral, no lock in, no onerous terms — and our advance and discount rates are much better too. We typically see advance rates of 90 per cent, discount rates of between 1 per cent and 2 per cent, and rates improve as sellers upload more invoices and buyers become familiar with their businesses. We’ve had a 100 per cent success rate of auctions closing.
Anil Stocker, founder of Marketlnvoice, also heads up the Next Generation Finance Consortium, a body that seeks to educate businesses and work with policymakers on behalf of crowdfunding platforms and peer-to-peer lenders. In this video, he outlines the new opportunities available to businesses seeking finance to start up or expand.
- Click the picture below to be re-directed to the site where you can view the video (see page 22) -