Funding Societies has announced that they will be launching financial services to complement their usual P2P funding platform—this time targeted at solving cashflow issues inundating SMEs.
When conducting regular business, SMEs may face issues collecting invoices, especially when dealing with large corporates as the paperwork and bureaucracy involved in the process of releasing payment could take some time—sometimes months.
Bigger companies may have the floating funds needed to keep them going through that entire process, but SMEs may lack that same runway.
Funding Societies’ Solution, in Essence, is an SME Loan
So Funding Societies’ solution is to provide up to 80% of the owed funds to SMEs within 5 days of their request, and a 1% interest rate per month.
They require no collateral, and offer a term range of 30 to 120 days—which fits nicely into the average 94.1 days it takes for regular Malaysian businesses to pay its dues.
Funding Societies’ Invoice Financing would not be the first mover into this segment, with other players like CapitalBay already eking out their own clientele in the SME market. Nevertheless, the scene for this type of service would not be considered ‘crowded’, and more players servicing a similar segment could be a boon for SMEs in Malaysia
According to the Malaysian SME Association, surveys revealed that 73% of SME respondents have taken late payments due to established business culture. The average credit term that SMEs offer is 47.3 days and on average with payment being delayed further by 46.8 days.
Since SMECorp Malaysia identified that 98.5% of businesses established here in 2016 are SMEs, this could mark a significant issue for the national economy.
Funding Societies’ usual operations involve peer-to-peer financing, where creditworthy SMEs are put on a marketplace that helps them connect with individual or institutional investors, which widens their net in acquiring crucial and relatively quick investments. The crowdfunding element of the website also allows for smaller injections from individual investors.
The company also operates in Singapore, and in Indonesia they are known as Modalku.
Wong Kah Meng, CEO of Funding Societies Malaysia, said:
“Compared to business term financing, SMEs opting for invoice financing will only need to make interest and principal repayments upon maturity rather than throughout the tenure of the financing. This repayment structure will enable SMEs greater flexibility in managing their monthly cash flows.”
“Cash flow management is especially important for small businesses. An SME’s growth trajectory will be dependent on its ability to finance its future customer orders. Thus far, SMEs applying for invoice financing are either wholesalers or manufacturers who utilize our funds to purchase inventory or raw material to meet additional customer orders.”
To date, it has approved more than 13,000 financing to SMEs totalling more than RM700 million across Southeast Asia. The company’s Series A and Series B Funding amounts to US$10 million and US$25 million, respectively. Its Series B Funding round was announced in April 2018 and was supported by SoftBank, Ventures Korea and Sequoia India.
Featured image via Funding Societies
