The invoice finance sector suffers from a peculiar lack of providers. Outside of the UK’s two major players (MarketInvoice and Platform Black) is nothing but a gaping void. In continental Europe there is but one pure invoice finance platform – Dansk Faktura Bors. There are a couple of very early-stage platforms, like LoanBook and Investly, looking to offer both lending and factoring facilities to borrowers – but it’s more or less quiet on the invoice finance front. This mystifying hush stands in sharp contrast to the buzzing peer-to-peer lending and crowdfunding sectors – within which scarcely a week goes by without a newcomer or two popping up.
But now the silence is about to break. A highly innovative e-invoicing company called Basware is partnering up with one of the leading asset managers in the alternative finance world – Arrowgrass Capital – to develop a new e-invoicing based factoring service. The new entity will be named Basware Factoring, and the plan is for it to go live in 2015.
Like MarketInvoice and Platform Black, the new platform will allow for suppliers to receive early payment for select invoices. In a departure from the typical model, the funding for those invoices will (initially) be provided solely by Arrowgrass – on highly competitive terms. The transparency and automation that the Basware Commerce Network brings to the table makes this move something of a no-brainer. Indeed, Andrew Jesse, Vice President of Basware UK, recently wrote (in a guest column for AltFi):
“Alternative finance platforms provide an ideal route for businesses wanting greater flexibility with their payments. But one issue when considering these platforms has been the need to prove that invoices have been accepted and approved by the customer – and this responsibility lies with the supplier. This is where e-invoicing can help. E-Invoicing and automation can supply the transparency required to provide this important proof point.”
“In a paper based system, a supplier would send an invoice and wouldn’t have confirmation of invoice receipt or approval until they actually received the payment or had to chase for payment. With e-invoicing, the supplier can see the status of their invoice, they can see it has been approved and can prove that the invoice is valid for payment.”
“When combined with the provision of alternative finance, e-invoicing really starts to transform the way that businesses think about payments. Alternative finance options facilitated by electronic transactions across an international commerce network, provides suppliers and buyers with a seamless and flexible way to manage their finances. Suppliers can receive payment against an invoice more quickly whilst buyers still have the option to hold onto their cash.”
Basware processed a staggering 60 million invoices worth over £500 billion in 2013. It’s on course to handle as many as 80 million in 2014. If even 1% of the suppliers of those invoices decide to test out Basware Factoring in 2015 – the platform could gain some serious traction extremely quickly. The platform will not feature a social, peer-to-peer aspect – and as such will not be of much interest to private investors. The big opportunity here is for suppliers – who will soon have at their disposal a powerful new method of tackling working capital issues.
And, who knows, perhaps the platform will open its doors to private investors somewhere down the line.