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text: Disrupting Debtor Finance: Cash is Kind - Interview with Brian Teng

Disrupting debtor finance: Cash is King – Interview with Brian Teng

This article was extracted from FinTech Innovation.  For the actual article, please click here


Small businesses have thrived for years on the back of sustainable business practices and solid customer relationships. They are able to do so despite the handicap of limited access to capital and just bare bones technology.

The good news is that national governments, including that of Singapore, recognize the importance of technology and are giving much needed financial support to help these small and medium sized businesses (SMBs) reap the benefit of technology.

According to Singapore’s IDA and its SME Development Survey 2015, DP Information Group, 70% of SMEs surveyed report reaping the benefits from their ICT investment within 1 year of implementation.

While cloud computing may mean that they now have access to potentially the same technology that much larger enterprises, they still have one handicap that may keep them from investing in the right skills and technologies to more effectively compete, expand into new markets, or grow the company. That is capital.

In the Singapore Government’s Budget 2016 proposal, the government announced plans to offer loan assistance for SMBs of up to S$300,000 per company, and that the government is willing to co-share 50% of the default risk of these loans with participating financial institutions, to encourage lending to SMBs.

But this may not be enough because SMBs’ financial struggles are often tied to debt incurred owing from customers deferring payments from anywhere from 30 days to as much as 120 days. In plain English, SMBs – like their larger counterpart – must contend with customers that insist on payment terms that may leave many SMBs struggling to survive under the weight of debt and limited cash flow.

So while acquiring capital to pay for new technology investments the real challenge for many SMBs is securing working capital to pay for operating expenses such as salaries, rental, utilities and transportation to name a few.

small business loan  Most SMBs do have loan facilities available to them, including overdraft and short-term loans. Some creditors, including banks, also offer factoring loans to cover trade debt. Factoring loan typically involves selling accounts receivable debt to a lender or factoring agent.

The bank will loan the SMB an advance on the account receivables of up to 90% of the monies owed based on the invoice. The amount can be as much as 90% of the billed invoice payable with interest of up to 15% of the gross invoice value or an annual interest rate of 5-8%. The agent will now be responsible for collecting the debt originally owned to the SMB, who by virtue of the factoring loan now has access to 90% of what originally billed, and can therefore have capital to put into the business.

The trade-off for SMBs is that they will not get the full amount on the invoice. There is also the risk that SMB customers might not be keen to directly deal with banks that might not be so keen to further extend credit favorable to them.

Brian Teng, co-founder and CEO, InvoiceInterchange  One Fintech startup that saw an opportunity in the factoring business is InvoiceInterchange.  According to co-founder and CEO, Brian Teng (photo right), SMBs looking for capital want to do so in terms more favorable to them. InvoiceInterchange offers flexibility, control and speed. Loans can be approved within 24 hours. Sellers can sell as many or as little of the invoices they have and at a time of their choosing. The Invoice Interchange platform allows for interested parties to bid for the invoices they want to buy giving SMBs more competitive rates. Teng said there are no service fees, no arrangement fees, no lock-ins and the service is confidential to customers.

In this exclusive interview with Fintech Innovation, Teng says the addressable market for InvoiceInterchange is SGD3 billion dollars. Watch the video to learn more about the InvoiceInterchange.

SMBs looking for an alternative approach to financing their working capital needs will find the InvoiceInterchange’s online invoice trading platform as a cost effective and fast solution. For investors, InvoiceInterchange brings an age old asset class – trade receivables – into the digital world.

He believes that factoring penetration in Singapore is at 5% compared to 10% in the UK. At the moment, Teng says that market awareness remains his company’s biggest challenge.

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