In the current scenario, Banks struggle to understand business risk, and hence they hedge this risk by taking double security. As for Factoring houses, they exploit business risk by charging higher interest rates because the risk is not clearly understood. This is where fintech startup Facevalue looks to make a difference.
The Netherlands-based startup provides working capital solutions and specialises in global Accounts Receivable and Payable Finance. The platform utilises demand-based economies of scale and leverages collaboration with large user communities.
Facevalue launches pan-Europe
In a recent development, the Dutch startup announced the introduction of Accounts Receivable Finance solution for European SMEs that challenges traditional factoring.
Traditional Factoring is generally known and used primarily as a working capital solution. However, factoring is not only related to financing. Most factoring solutions to SMEs require that the business sell all their outstanding accounts receivables to the Financier for a fixed period, usually two years that includes high fixed costs.
Neels Bornman, Chief Executive of Facevalue, explains, “The banking landscape has changed so much over the past decade that it has become a real challenge for most businesses to present their business case to lenders. There is often no one to receive their application, let alone understand the dynamics in their business, and by the time the application is assessed, it is already dated. Facevalue has built a secure online platform that extracts invoice data, handles the mapping and conversion of data formats and lists all our clients’ outstanding accounts receivables in a ledger from where they can configure rules, or choose manually which receivables they would like to sell immediately and without recourse.”
As most businesses are unwilling to utilise Accounts Receivable Finance solutions as part of their financial planning due to high fixed costs, Facevalue aims to deliver a solution that offers flexibility to its clients to determine which receivables they want to sell and charges no fixed fees.
The company says, “Selling a receivable to Facevalue is as easy as emailing the invoice straight from an accounting system to a dedicated email address we create for each client.”
The platform uses a combination of optical character recognition (OCR) and artificial intelligence (AI) to convert a PDF invoice to a Peppol compliant structured electronic invoice. New clients can immediately sell their top priority receivables while Facevalue performs a detailed credit assessment. Thereafter, it facilitates up to €5M for SMEs across the European Economic Area and the UK.
Prior to the launch of its SME solution, Facevalue offered services to the corporate mid-market in collaboration with Global Transaction Banks. The company raised €9M in funding, to date, and is supported by institutional bank and non-bank investors that finance the Accounts Receivables and Payables it purchases.
Facevalue believes Accounts receivable finance is a vital tool for markets to recover and help global transaction value to eclipse pre-pandemic levels and continue growth.
Bornman adds, “Our research of European cross-sector mid-market corporates show that even before the pandemic, revenue was up year on year but even then companies struggled to convert revenue to cash. In addition, capital expenditure as a percentage of revenue has continued to decline, which implies that companies are managing cash by not making capital investments. During the pandemic, revenue declined and is now only starting to recover. We predict that capital expense will remain a low priority while cash flow management becomes the number one priority.”