InvoiceFair, a Dublin-based firm set up in 2015 to allow companies to raise finance on the back of invoices, has rebranded as Financefair as it broadens its products for small and medium-sized businesses after delivering €1.5 billion of funds in its first eight years.
The company has recently added a revenue-based finance product, that allows companies to raise money based off predictable turnover, and a preapproved line of credit product, which operates as an alternative to business overdrafts.
Other potential business lines are also being explored, according to chief executive Helen Cahill, as the company targets what it sees as unmet needs of growing medium-sized businesses, even as there has been a surge in the number of nonbank lenders servicing niche areas of the market in recent times amid a retrenchment by traditional banks.
“In Ireland, the large multinationals continue to be well served by domestic and international banks, while small and mid-size companies are ignored by foreign banks and are selectively serviced by domestic and some nonbank alternatives – but it will all depend on their size and/or sector,” Financefair chief executive Helen Cahill said.
Ms Cahill cofounded the company with Peter Brady, who is its chief revenue officer.
The funds on the Financefair platform are ultimately provided by regulated institutional receivables funds based on both sides of the Atlantic.
Ms Cahill said that Financefair’s model allows for faster, more flexible credit decisions – aided by open banking, which allows customers of banks to share data with third-party providers, and an ability to access companies’ accounting systems – than traditional funders. However, borrowing costs are higher, at a time of heightened interests rates internationally.
The company’s invoice finance system will advance up to 90 per cent of the value of an approved invoice. The current average annual equivalent rate (AER) of interest on this product is about 10 per cent.
The revenue-based finance product offers advances of up to 20 per cent of predicted annual recurring turnover, currently priced at an average AER of 15 per cent. The average line of credit rate is about 12 per cent.
Ms Cahill said this product can often postpone the need for a start-up to raise equity at a time when it would be highly dilutive for founders and initial backers.
Irish business debt market has been transformed over the past 15 years from one dominated by eight banks and a handful of alternative finance providers to one where there are only three surviving domestic banks, while more than 60 nonbank lenders now account for almost a third of current SME lending flows, BDO Ireland’s head of debt advisory Mags Brennan said in an interview with The Irish Times earlier this month.
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This has increased the onus on businesses to “shop around” for the best-value products to meet their needs, she said.
Even with the growth in nonbank finance providers, Ms Cahill said that many of their products and underwriting process are “not fit for purpose” for scaling small and mid-sized businesses.
“Getting fast access to working capital is vital for SME’s to stay competitive and nothing short of imperative for those with ambitious growth plans,” she said.
Ms Cahill also sees a potential opportunity for Financefair to get into so-called embedded finance solutions in the future for companies targeting business customers.
“Those who have shopped online have likely interacted with, or at least seen, embedded finance, mainly in the form of Buy Now Pay later buttons,” she said. “Most B2B [business-to-business] sales are for larger critical purchases where funding is not an option, per se, but a fundamental requirement.”