I recently tried out InvoiceInterchange, a p2p invoice financing platform. Invoice financing refers to the sale of receivables for cash at a small discount. Compared to SME lending, invoice financing is typically less risky because it is backed by a receivable from a credible trade debtor. Naturally, the returns can be lower than what SME lending offers.
I have invested a small amount of money on invoice trades on InvoiceInterchange. For the benefit of other p2p enthusiasts, I’ve decided to feature an interview here with the founders of InvoiceInterchange. Note that this is not a recommendation nor an advertisement. Neither I nor this blog earns any income from InvoiceInterchange (or any other p2p platforms).
Interview with the founders of InvoiceInterchange
What inspired you and your co-founder to start InvoiceInterchange?
My co-founder and I always wanted to go into business. Whilst working in accounting firms and banks, we witnessed many SMEs struggle to obtain bank financing. Our co founder’s family ran a traditional factoring business and we could see how innovative alternative finance models were beginning to take off in countries like the USA and the UK. This got us both thinking about how we could channel new forms of capital to SMEs and how we could bring the age-old business of factoring into the modern world through harnessing the power of the internet.
Tell us more about your respective backgrounds.
Co-founder Brian is a qualified accountant who began his career in the Big 4 accounting firms before taking up his first banking job with Lehman Brothers. Brian was working in Lehman’s London office when it went bust! He then worked for Bank of America and HSBC before moving to sunny Singapore in 2015. He studied Accounting and IT at Monash University and is very interested in the way that technology can make finance more efficient.
Co-founder Nalinee has over 10 years experience in banks in Australia (NAB) and the UK (Credit Suisse, HSBC, RBS), managing the delivery of large front-to-back IT projects across front office, middle office and back office functions. Nalinee successfully implemented IT systems to support the businesses of fixed income, loans, collateral and cash management. Nalinee has a degree in Software Engineering and a Master in Operations Management from University of Melbourne. She’s passionate about making technology work in a simple, cost effective and powerful way.
What is p2p invoice trading?
Invoice trading is the process where firms sell their outstanding invoices via a centralised online platform to a pool of individual or institutional investors in order to obtain funds immediately rather than waiting for invoices to be paid.
How is InvoiceInterchange different from other p2p lending platforms?
- The product; the platform facilitates the sale and purchase of trade receivables, which is an asset on the balance sheet, whilst other p2p lending platforms provide for unsecured loans
- InvoiceInterchange provides SMEs a way to release cash tied-up in their outstanding invoices. While for investors, InvoiceInterchange provides the opportunity to invest in the trade receivables asset class for a decent return.
How is InvoiceInterchange different from other traditional factoring companies?
InvoiceInterchange gives SMEs access to funding without the hidden fees or the unnecessary terms and conditions imposed by the big banks or the traditional factoring companies. There are 3 key differences:
- Entirely flexible service: You don’t need to sign up to long contracts. It’s a pay-as-you-go service where you only use us when and if you need the finance.
- Technology: Online and easy to sell an invoice with a few clicks of a button
- Transparency: Only 2 simple fees. There are no set up costs, no monthly or minimum fees.
What are the strengths of InvoiceInterchange?
- reliable, simple and easy to use trading platform for both SMEs and investors
- credibility, integrity and a team with many years of experience with the right blend of skills
What are the potential risks and rewards for investors?
Risks: Default – however we only take invoices that are issued to large credit-worthy organisations (e.g. MNCs, listed companies, government)
Rewards: Opportunity to invest in and diversify capital into a secured, highly liquid product with attractive risk adjusted returns.
What safeguards are there to protect investors against non-payments? How would II handle defaults?
First, InvoiceInterchange is a members only platform. We conduct rigorous due diligence on each SME to ensure they are financially sound and stable before they are allowed to sell invoices on the platform. There is legal recourse where SMEs are obligated to repay investors in the event the Debtor defaults (i.e. non-payment). Invoices on the platform are against strong creditworthy debtors – this helps minimise non-payments.
Second, we are also looking into introducing trade credit insurance for our investors.
How is InvoiceInterchange regulated?
InvoiceInterchange is currently not regulated by MAS. We provide a platform that facilitates the sale and purchase of receivables. InvoiceInterchange does not provide investment or financial advice to investors.
What are the fees charged to the investors and the borrowers?
Investors: 20% of profits
SMEs: Fixed processing fee.