By Oliver Smith on Wednesday 22 April 2020
A brilliant fintech solution developed in just 48 hours.
This Friday tens of thousands of small businesses across the country will have to pay furloughed employees, despite cash from HMRC not expected to arrive until Monday at the earliest.
The looming SME cash crunch puts 1m+ furloughed employees at risk of either not being paid, or facing significant delays to their salaries while their employer waits for cash to arrive.
By some estimates the furlough cash owed to small businesses by HMRC is already well over £1bn and could be as high as £20bn depending on how many SMEs register each day.
In the face of this overwhelming challenge, fintech MarketFinance is stepping up by today repurposing its invoice-financing engine to solve the problem.
“Essentially these SMEs have an invoice that will be paid in 6-10 days by the government,” CEO Anil Stocker told AltFi.
“They can now put that into our platform, we still run our standard checks and grade the risk just like any other invoice, and our existing investor base can lend against those invoices.”
In addition MarketFinance runs two additional checks, firstly that a business has submitted a furlough claim via the government’s portal, and secondly that the leant cash is going directly to employees and isn’t being used for other business purposes.
Like MarketFinance’s typical invoice financing, Stocker says SMEs will be charged interest of between 1-3 per cent for the time during which the funds are outstanding (which should only be a matter of days), and the interest is then split between lenders and MarketFinance.
Unlike its invoice financing, the furlough financing is limited to amounts below £150,000 as “we think that the pain will be felt the most by the smallest businesses. If we can increase the amount next month, we’ll try.”
Stocker says MarketFinance’s team built the entire system over the last weekend in just 48 hours after spotting this looming cash crunch for SMEs, and have done so without any government involvement or support.
“But if HMRC wants to talk to us about this, we’re happy to pick up the phone,” the CEO says.
For now Stocker doesn’t know whether the system built by MarketFinance will be used by 100 or 10,000 SMEs but is happy to help as many, or as few, businesses who need it.
“We want to make it available on a monthly basis for businesses, for now the furlough scheme is available for 3 months, but it might well get extended.”
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