P2Binvestor launches New Hybrid Line of Credit

By Guglielmo de Stefano on Tuesday 20 October 2015

Alternative Lending

The marketplace lender P2Binvestor has today announced the launch of two new products and revealed a $110 million funding milestone.

After having forged its first institutional partnership with the alternative asset management firm HCG at the beginning of October 2015, P2Binvestor, the US based marketplace lender for asset-backed working capital, has today announced the release of two innovative products and the achievement of a new milestone.

This major improvement is represented by the launch of “Ex-factor”, a hybrid-asset-based line of credit. The product aims to disrupt the existing factoring market, considered cumbersome, complex and expensive, not only by P2Binvestor, but also by businesses. Focusing on simplification, the platform has created “Ex-factor”, with two challenging goals: offering credit to its clients more quickly and effectively, and providing investors with higher yields.

Krista Morgan, CEO and cofounder of P2Bi, commented:

“What we learned after servicing nearly 50 clients in the last year is that almost everything about factoring is stuck in the past—we needed to innovate, simplify or altogether change all that is cumbersome about factoring; that’s why we created Ex-Factor”.

Last week, AltFi had the chance to interview Krista, who described the new product and explained the company’s future strategy.

P2Bi’s “Ex-Factor” is a revolving line of credit collateralized by accounts receivable, monthly recurring revenue or inventory. The line of credit is dubbed hybrid, since P2Binvestor might also use its balance sheet to fund businesses more quickly and to bridge gaps, when required. Compared to the traditional receivables-secured financing process, three major things have been changed:

1. Pricing: P2Binvestor has moved to a single daily rate on an outstanding balance compared to a fee per invoice. The result is a more transparent and simple pricing process, in an industry known for its hidden fees and costs. The platform acknowledges that this choice will reduce its revenues by about 25%, it is banking on this structure driving higher growth. The annual average APR for borrowers is about 15-25% and they can easily check how much they are paying, even from their smartphone.

2. Operations: the relese of the product will require a shift towards a slightly different business model. The platform has changed its back office system, rewritten policies and developed new operations processes. 

3. Technology: P2Binvestor has built a new customer interface from scratch to provide borrowers with a better and simpler user experience. To access credit, businesses are no longer obliged to submit invoices and funding request protocols. Instead, they simply need to follow a few steps, such as uploading their sales journal and specifying the amount of funds nedeed. The next day the business will received the funds requesed, enabling them to get back to running their businesses. 

The product is being welcomed by borrowers for its simplicity, transparency and convenience. Brenda Cagney, general counsel and co-owner of Cagney Global Logistics, a client of P2Bi, weighed in:

“As a former securities attorney, I’m immensely impressed with what P2Binvestor is doing. As a client, I can tell you that Ex-Factor is among the best financing options out there. […] P2Bi has been a breath of fresh air; they get all of the important things right, are transparent and make everything so easy for clients without sacrificing service. The fact that I can log in at any time and understand quickly the state of our account is a first for us”.

P2Bi’s investors are equally happy, with average annual APRs ranging from 7% to 14%, 60-day liquidity and easier reporting.

“Ex-factor” is just one of a number of balls that are presently being juggled for P2Binvestor. Indeed, P2Bi today has introduced also a proprietary borrower platform, called “Lending Hub”, which integrates with the company’s investment platform launched last year. The aim of this product is to enable a faster and efficient lending process, simplifying the complexity of invoice-level borrowing and accounting. The first version of the product was released to existing clients earlier this month.

The company revealed today that it has funded $110 million in invoices funded since May 2014, a sign of the significant growth and increase of market share that P2Bi is experiencing.

Krista concluded:

“We are the only platform tackling multi-million dollar lines of credit for growing businesses and achieving this $110 million dollar milestone in 18 months speaks to the huge need for a technology-driven product. Underwriting deals of this size requires more than personal FICO scores and basic cash flow analysis, and we’re proud to be the first marketplace lender to create a scalable process, platform, and a real solution for this market.”

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