Home > Uncategorized > Fundbox. Another online platform

Fundbox. Another online platform

fundbox_teamIs it possible that in then not to distant future, online “alternative” invoice financing will out perform the traditional facilities?

Despite the overwhelmingly positive publicity, that prospect is further off than many would like to imagine but there are an increasing number of new players in the market, the latest of which is pictured here.

The first slightly cruel observation was ‘here we go again’ with a group of beards in the corporate tee shirt. The look has become as familiar as a bad grey suit in the banking industry. The next thought was to wonder what they could offer that was different to what we have seen before and the answers that sprung to mind were ability to fund small items and pure speed.

A facility that can genuinely fund very small accounts with no formal contract or arrangement is welcome. It is a genuine gap in the market. Speed is also of the essence too. Tardiness by lenders can be extremely frustrating and is illustrative of many banks complete lack of comprehension of the day to day requirements of any business and how these can change. Just last month a deal I was handling was effectively lost because the client was rightly frustrated at the slow responses

This is a serious weakness in the invoice finance market

But where are the weaknesses with some of these online platforms?

Again speed is the issue and there is the flip side of the coin. Fundbox promise to fund within 50 seconds if the data stacks up. Great. Credit ratings on both sides are important but so is the contract. And who is going to read that in 50 seconds? This can lead to serious exposure

Also credit ratings vary enormously and they are going to have to be very sure of their sources. This being in the US, information will not always be easy to obtain too. Data takes analysis and should be the starting point. The risk may be fine for the very small transactions but I can foresee difficulties further down the line with certain higher value items

Lastly there is the cost. These invoices are funded by outside investors and that will not generally be cheaper than a bank. The article skipped over this point to some extent

Only last year Citibanks invoice financing was hit by a large scale fraud which was long term but not particularly sophisticated. I fear that some of the wide eyed new facilities are very open to similar which in the event of a high profile large scale calamity will send investors running possibly putting back the enterprise many years. In fact this has been seen already in the UK

Ultimately cost of borrowing equates to risk. Or maybe we should say perceived risk. To remain competitive in the market the investors confidence has to remain strong. Lets see if they can maintain that

Categories: Uncategorized
  1. Wolfe
    April 1, 2015 at 5:08 pm

    And how will they manage their cash flow gaps?

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