AREX takes invoice finance to online marketplaceby
Bolstered by an €8.8m cash injection, Helsinki-based fintech developer AREX Markets is taking on the UK invoice finance giants with an online exchange where small businesses can sell their invoices to investors to raise short-term finance.
AREX differentiates its online invoice finance platform from other fintech lenders by offering a marketplace for individual investors to buy invoices from borrowers, rather than relying on traditional banking backers. With small businesses scrabbling for cash through the pandemic, AREX boasted it could finance up to 95% of all invoices submitted to the platform within 24 hours.
The company has been working towards 20% year-on-year growth in Nordic countries during 2021 and the new funds from established fintech investors will help accelerate the lending platform’s expansion into the UK and Spain, AREX said.
A key element of the AREX approach is that its version of invoice finance is not the traditional last resort – it’s a positive path to getting access to a sustainable source of finance that can grow as the business expands.
Accounting data stimulates competition
The magic of cloud-based finance is that by connecting to the borrower’s online accounts, the platform can support more competition for smaller loans, AREX chief executive Airto Vienola explained.
“Technology allows better analysis of public domain and private information. That allows for competition in smaller lending,” he said.
“If you are looking for a £100m business loan, then the cost of underwriting is not prohibitive, so there’s competition. But for a £10,000 loan, big players don’t want to be in that field because the fixed cost is too high and they can’t compete.”
According to Vienola, the accounts data analysis feeds into the risk assessment algorithms used by investors on the AREX platform, who compete with bids for the invoices posted. Market demand will organically reduce the cost of cash for borrowers.
“Our goal is to level the playing field for SME financing. Banks remain reluctant to lend to SMEs, often leading to them feeling trapped when it comes to their business finances,” said Vienola. “We’re already seeing a sharp rise in demand for this service and a willingness for business owners to finally reappraise their financing options, which have been so unfavourable for so long.”
Early UK feedback
Woods Squared director Alan Woods, a long-time AccountingWEB contributor and practice award winner was “very impressed with the service” and endorsed AREX as a means to help client businesses unlock cash trapped in their receivables.
“They were able to choose which invoices they wanted to sell and access cash within 24 hours,” said Woods. “[AREX] have a very innovative business model which gives SMEs a more sustainable channel to access financing.”
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