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AREX Markets brings online invoice finance platform to UK
Fintech mechanism_AREX

AREX takes invoice finance to online marketplace

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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.

7th Jul 2021
Editor in Chief AccountingWEB
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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.”

Replies (3)

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By Hugo Fair
07th Jul 2021 13:26

Isn't this basically just Greensill with even less regulatory protection?
And in the current environment (BBLs etc) encouraging SMEs to overtrade?

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Replying to Hugo Fair:
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By 52Walter
13th Jul 2021 04:52

Hugo Fair wrote:

Isn't this basically just Greensill with even less regulatory protection?
And in the current environment (BBLs etc) encouraging SMEs to overtrade?


ordinary financial management routines on Talenom Online. It has never been so ... est service on the market, ena- bling you to keep your cash ... Your company sends invoices to limited liability companies, cities ... The service is provided by Arex European Market Limited. INVOICE ... a loan offer. Take your time and decide.

https://www.dgcustomerfirst.ltd/

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Replying to Hugo Fair:
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By Indi.Tatla
13th Jul 2021 14:57

Greensill is a form of reverse factoring, in essence a "buy now, pay later" model that allows the Customer to extend payment terms and disguise on the balance sheet.

AREX Markets helps those SMEs who just want to unlock money in their unpaid invoices. Unlike reverse factoring services it doesn't continue to add interest to the bill or extend payment terms beyond the agreed payment terms. This stops the business of overtrading.

True the space needs more regulation post-Greensill. But actually what most SMEs need is more awareness of the cost of financing and implications of entering into an arrangement. We want to ensure we remain transparent so SMEs understand what the red flags are.

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