New ‘e-Bay for invoices’ financing option
NESTA's “Beyond the Banks” report showcases a cloud based online marketplace that brings together companies that want to sell their outstanding invoices with investors who bid against each other to buy the invoices for a percentage of their face value plus a commission.
MarketInvoice serves to channel non-bank capital to small businesses to fund working capital: but unlike alternative sources of commercial finance, there are no “belt-and-braces” security arrangements, no monthly fees and the service is confidential, so that those who owe money against the invoices do not know that they have been sold to a third party.
The Company is in its early stages, having undertaken its first trade in February this year. However, by August it had traded about £1 million of invoices and attracted 25 companies as customers.
An article in the Telegraph Business Club this month reveals that Marketinvoice buyers include hedge fund managers, asset managers, family offices and wealthy private investors. The buyers compete in a real-time auction to determine how much of an invoice’s value they will advance - up to 90% - and the fee they’ll charge, typically between 1% and 2%.
Deals can also be done on a “fractional” basis so investors can bid on part or all of an invoice and cash is advanced in less than 48 hours.
MarketInvoice takes a flat 0.5% cut of the invoice face value.