Published on March 2, 2015, in Startup Daily
Talk to nearly any small business owner about problems they face in the day to day running of their business, from a new startup through to an established SME, and there’s a very good chance the topic of cash flow will come up.
Having both worked in accounting and banking, Melbourne husband and wife pair Andrew and Charlotte Petris have seen clients struggling with the problem first hand. Thinking there had to be a way to use technology to give SMBs a better deal, they came up with InvoiceBid.
The platform allows businesses to have their invoices funded by investors who bid on each invoice, giving businesses access to working capital immediately instead of waiting up to 120 days for their invoice to be paid by a debtor. Invoices must have a minimum value of $10,000, with a maximum value of $1 million.
“Growing up working in a family business, I experienced first-hand the constraints that stem from a lack of cash flow. Following a career in finance I worked with all business sizes from startups to large companies, advising on raising capital. I noticed how tough this process was for SMEs and also how finance has not kept pace with changes in technology. The banking and finance industry has been largely unchanged for decades,” Charlotte said.
The pair believe there is a huge untapped market for their business.
“In Australia, 4,000 businesses use invoice finance, to a value of $63 billion of invoices each year. In addition to this, businesses have $240 billion in bank loans. Combined with the ‘unbanked’ market where 30 percent of SMEs have missed opportunities due to a lack of finance, the market size for InvoiceBid is significant,” Charlotte said.
“Our product crosses all three of these market segments. Because we don’t discriminate by business size or sector, we have been able to help growing businesses that have never had access to finance before. And for those that have used invoice finance, we have been able to reduce their cost of finance by up to half.”
By connecting businesses with investors directly, InvoiceBid reduces the fees businesses would be paying banks to access funds through invoice finance, with fees calculated according to invoice value and the length of time until it’s paid.
While the advantages of InvoiceBid for small businesses are clear, Andrew believes the service is also a valuable tool for investors, who can buy a whole invoice or as little as 5 percent.
“There are few options for investors in Australia, particularly in fixed income. Despite Australia having one of the largest superannuation industries in the world, close to $2 trillion, it has one of the lowest rates of returns to investors. A significant portion of the funds are held in cash deposits, providing inflation adjusted returns of close to zero. Introducing these funds to the InvoiceBid platform provides better returns for investors and enables the sharing of capital within the economy,” he said.
The pair are primarily marketing their business through the network they developed working as chartered accountants, with word of mouth from existing customers also helping it grow.
“Business owners are not always aware of all the options available, especially with new products entering the market, and do not have the time to research these and keep updated. We are utilising this network to raise awareness of InvoiceBid and other new and innovative alternative forms of finance that sit outside of the banks and financial institutions,” Charlotte said.
The aim for the platform this year is to further integrate processes and improve the end user experience, with the Petrises aiming to have applications approved within minutes of uploading, with funding advanced the same day.
“Our focus this year is also to build awareness of not only our product, but a whole new alternative finance industry that is developing in Australia that can benefit both businesses and consumers.”
Source: Startup Daily