Small businesses are often caught in a cash crunch when dealing with large corporate customers who demand generous payment terms, but a Melbourne fintech has the solution.
Timelio is disrupting traditional lending models by enabling growing businesses to turn outstanding invoices into cash in a matter of hours. Research shows that over 90 per cent of small business failures are attributable to cash flow problems, so prompt payment can be the difference between life and death for an SME, says Timelio founder and CEO Charlotte Petris.
“SMEs can’t be expected to support the balance sheet of large corporates,’’ says Petris. “We see businesses that are being paid on 120 days.
“At the same time, SMEs often can’t get bank finance, or if they can it’s too restrictive. Through our service, we are supporting other businesses like us to keep growing.’’
Timelio provides a P2P platform where businesses can auction off outstanding invoices to investors. Funds are released to the seller within two hours of an auction close, freeing up money for critical cash flow.
The business started in April 2015 and has grown rapidly, achieving over A$70 million in lending to date on an average invoice size of around A$50,000.
Last year, Timelio raised A$5 million in an oversubscribed equity funding round. They also launched the Timelio Capital Fund, which has attracted interest from institutions as well as foreign investors. The fund is now anticipated to grow to A$100 million.
“It’s a really effective vehicle for passive investors to deploy larger amounts of money across the platform,’’ says Petris. “Not everyone wants to sit there actively buying invoices.’’
The Small Business Ombudsman has referred to slow and late payments by big businesses to SMEs as a “silent killer” of small businesses.
“We completed a submission to the Ombudsman’s 2016 Small Business Loans inquiry,’’ says Petris.
“Our new supply-chain product really addresses that problem in an efficient way. We work with the corporates and offer to pay their supply chain early. By integrating with their systems and providing a funding mechanism that is offered out to all of the SMEs in the supply chain, we can say to them ‘do you want early payment?’ ‘’
Timelio is able to offer the product at a very low price, as with guaranteed payment it can effectively base the cost of finance on the corporation’s credit rating.
Flexibility in funding
Petris says the nature of Timelio’s investor base allows them to be creative and flexible as new opportunities become apparent.
“Another area of finance that is under-serviced is progress payments. We do a lot of work in the IT services sector, especially with regard to contracts and progress claims.
“We also fund exporters, including Victorian manufacturers selling overseas—there’s another gap in the market there, as traditional financiers typically won’t consider overseas invoices.’’
At home in Melbourne
Petris says she and her husband Andrew, co-founder and head of investors at Timelio, have found Melbourne a welcoming and supportive environment since relocating from Singapore to launch the startup in 2015. The business now employs 18, half of whom are women.
“It’s been very easy to move and live here, and a great place for setting up a business. People here are really helpful, and we’ve had strong support from local government. All in all, it’s been a pretty positive experience.’’
With Timelio enjoying stellar growth, Petris has had little time to plan too far ahead into the future, but she has a vision.
“I see international expansion on the cards; there are great opportunities for us to expand into Asia, but our headquarters will always be here in Melbourne.’’