One of the most exciting players to enter into the French alternative finance space thus far has just completed a $22.5m funding round.
Finexkap is a uniquely structured invoice finance provider. Unlike the familiar MarketInvoice and Platform Black models, Finexkap doesn’t fund invoices via amalgamations of retail and institutional capital. Instead, the receivables of small businesses are purchased through refinancing vehicles that are in turn managed by Finexkap AM. Finexkap has just closed on a raise of $22.5m in total – comprised of a $7.5m Series A equity round and a further $15m, which will be used to finance the platform’s first flurry of deals.
$4.1m of the Series A round was contributed by the ever-active GLI Finance, and the total amount of $7.5m equates to a 26.44% ownership stake in the business. The Series A funds will be used to ramp up the platform’s data and product operations, to boost its marketing initiatives and to add a number of additional personnel.
"Finexkap has developed a flexible way of financing working capital for SMEs in France by allowing small businesses to choose the invoices they wish to clear and get funded without any sort of commitment, in stark contrast to traditional banks in France which typically do not offer spot financing. With a huge demand for this type of flexible finance and innovative proprietary technology, the platform has huge growth potential and should be a great partner for GLI Finance."
There a number of statistics that support the notion that Finexkap has sniffed out a tremendous opportunity. The annual volume of receivables for French B2B companies exceeded $800 billion in 2013. What’s more, 2014 also saw more than $270 billion of receivables purchased in France – by just 14 factoring companies. 25% of the nation’s corporate bankruptcies are caused by short-term financing issues.
So how is Finexkap equipped to take advantage of this situation? Like more traditionally structured online invoice financiers, the platform will allow SMEs to sell selectively, rather than trading away the entirety of their accounts receivable. Finexkap will also look to distinguish itself through technology. Its credit scoring algorithms take account of cutting edge data science, behavioural analysis and finance theory – in order to produce a short-term solvency score for both sellers and debtors.
Cédric Teissier and Arthur de Catheu, Co-Founders and CEOs of Finexkap, explained:
"The data-driven models we have developed are applied to a securitisation fund. Our investors have access to this fund without any need to analyse the underlying assets. This differs from the marketplace model where companies auction their receivables that many investors, relying on qualitative rather than solvency tests, in reality do not know how to price. With the latter model, the risk/ return ratio ends up being uncorrelated and it is difficult for such a company to scale to a sustainably profitable size. At the end of the day, our solution enables investors to finance SMEs' working capital through a diversified exposure to receivables."
In conjunction with the completion of its fundraise, Finexkap AM (a wholly-owned subsidiary of Finexkap) has just received the regulatory approval of the French Financial Markets Authority. Everything is set for the platform to kick things off with a bang at some point before the close of the year.