Monday, 1 February 2010

Further Boost To Non-bank SME Finance

Last week, The Receivables Exchange secured $17 million in funding from Bain Capital Ventures.

I've been watching these guys since I learned of their launch in a response to my post about Zopa's trade finance efforts in November 2008. The coincidence was striking then, but even more so when they announced their integration with Ariba Network, the spend management services provider, in December '09.

The key feature about this form of trade finance is that credit risk can be tied firmly to the buyer, rather than the supplier listing the invoice for 'sale'. There are various ways to understand and mitigate that risk, depending on the size of the buyer and whether it's listed/rated. I'll spare you the detail. Interestingly, the UK Treasury has just launched a consultation on how the government might support non-bank business finance, focusing on corporate credit assessment and transparency.

Of course, the primary challenge is one of marketing this model to enough time-starved small business owners to build 'critical mass' (an expresson I have come to fear and loathe) - hence the $17 million.

Definitely a space to watch.
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