UK-based MarketFinance raises $ 383 million to bolster its SMB online lending platform – TechCrunch
Small and medium-sized businesses regularly experience cash flow problems. But if this is an already awkward situation, it was made aggravated to the breaking point for too many during the Covid-19 pandemic. Now a British startup called MarketFinance – which has built a loan platform to help SMBs stay afloat in these lean times – is announcing a huge £ 280 million ($ 383 million) injection of cash to look for a new one Prepare wave of loan applications.
“It is a good time to start the business cycle to lend,” said CEO and founder Anil Stocker in an interview.
Funding comes primarily in the form of debt – money that is lent to MarketFinance in order to lend it in turn to its clients as an approved partner in the UK Government’s Recovery Loan Scheme; and £ 10 million ($ 14 million) of that is equity that MarketInvoice will use to further improve its platform.
Italian bank Intesa Sanpaolo SpA and an unnamed “global investment firm” are providing the debt, while the equity stake is managed by Black River Ventures (which has also backed Marqeta, Upgrade, Coursera and Digital Ocean) with the participation of existing financier Barclays Bank-PLC. Barclays is a strategic investor: MarketFinance operates the bank’s online service for SME loans. Other investors in the startup are Northzone.
We know the company’s valuation is under $ 500 million but above $ 250 million, although no figures are officially released.
Stocker said MarketFinance has been profitable since 2018, one reason it hasn’t given up much equity in this current finance tranche.
“We’re building a sustainable business, and the equity we raised was to free up better debt at better prices,” he said. “It can help put more equity on the balance sheet.” He said the money will “go into our reserves” and be used for new product development, marketing and further expanding API connectivity.
This last development is important: It attacks the great wave of “embedded finance” games we see today, in which third-party providers offer loans to customers on their own platforms – with the loan product operated by MarketFinance, similar to Barclays Time. The range of companies taking advantage of this is potentially as wide as the internet itself. The promise of embedded funding is that any online brand that already does business with SMBs could potentially offer loans to those SMBs to … doing more business together.
MarketFinance started out a few years ago as MarketInvoice with its basic business model, which aimed to provide short-term loans to a particular SMB for the value of their unpaid bills – a practice commonly referred to as invoice financing. The idea at the time was to solve the most immediate cash flow problem faced by SMEs by taking advantage of the very thing (unpaid bills that would normally be paid at some point, just not instantly) that caused the cash flow problem in the first place.
However, much of the invoicing SMBs receive comes mainly from working capital, which helps businesses with payroll and paying their own monthly bills. However, Stocker said that over time, the startup could see a greater opportunity in providing funding that was larger sums and covered more ambitious business expansion goals. That was two years ago and MarketInvoice was renamed MarketFinance accordingly. (It still very much offers the invoice-based product.)
The timing turned out to be random, even if the reason was definitely out of luck: Covid-19 came along and completely turned how much of the world works. SMEs have been on the thin edge of this wedge, not least because of these cash flow problems and the fact that their size means that they are simply less focused on diversification and pivoting due to changing market forces.
It turned out that this represented a great opportunity for MarketInvoice.
Stocker said that at the onset of the Covid-19 pandemic, the bulk of the credit was taken out to deal with business disruptions due to Covid-19. Interruptions can mean business closures or simply result in customers not coming back as they did before, etc. “The big issue was smooth access to finance,” he said, using technology to digitally evaluate applications better and faster, without “meetings with bank managers ”and the response time of the typical 4-6 weeks that SMEs would have traditionally expected to be reduced to days.
If last year it was more of ‘panic, stocking up or panning’, in Stocker’s words, ‘we now see a number of them struggling with supply chain problems, Brexit worsening and labor shortages. It’s really difficult for them to cope with all of this. “
He said the number of loan applications has gone through the roof, so there is no shortage of demand. He estimates the monthly loan inquiries were up to $ 500 million, a huge sum for a small startup in the UK. It is selective in lending: “We support those who we thought would return the money,” he said.