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Angus Sedgwick, CEO of The Invoice Market, explains his business’ point of difference from traditional debtor finance firms, and how brokers can benefit from offering its service.
What is The Invoice Market?
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The Invoice Market (TIM) is an innovative peer-to-peer invoice funding platform which provides single invoice funding to Australian businesses. TIM sources capital from a panel of approved funders that include SMSFs, high-net-worth investors, family offices and institutional fund managers. TIM’s role is the origination of invoice-funding opportunities, gathering of the due diligence requirements required to assess the transaction, presenting that funding opportunity to our panel of funders and managing and reporting each funding transaction.
How is your business model different from other debtor finance specialists?
The Invoice Market provides what is known as cash-flow funding. In a general sense, cash-flow funding is defined as obtaining cash against the value of your unpaid invoices – however, within that very generic space, there are distinct product differences.
Spot or single-invoice factoring – which is what TIM specialises in – does not contract the client to factor their entire debtor book. They can pick which invoice/s, which debtor and when they would like to sell an invoice to raise funding. The transaction is the sale of an asset (the unpaid invoice) at a discount to the value of the asset (the discount fee paid to the funder). Spot-factoring clients tend to be SMEs that are more newly established and maybe not yet profitable, running an ATO tax debt payment plan or experiencing other issues that would immediately make them unable to meet the criteria of the banks or the second-tier players. Or they may be businesses that meet the bank approval criteria but do not want to be locked into a 12-month whole-of-turnover facility.
The Invoice Market funding model is unique in that we source funds from a panel of approved funders – therefore, one funder may decline to fund a deal, yet another funder may take it on. We are therefore a very flexible provider of invoice funding and not bound by strict risk assessment criteria.
How does your service help brokers who are offering debtor finance, and in particular, invoice funding? How will it help their clients?
Many SMEs are unable to obtain traditional debt finance, whether that be an overdraft, business loan or debtor finance, as they may not meet the strict lending criteria imposed by traditional financiers. The flexibility offered by TIM is a great advantage, as we can cater to all types of businesses, business structures and across industries that many traditional funders will decline, including construction. This allows brokers to offer our services to their business clients with a higher degree of confidence.
Also, single-invoice funding allows the client to use our service for a short period of time – even one-off rather than being locked into a 12- to 18-month contact that may not suit their business growth.
Has there been much interest from brokers wanting to use your service?
Yes, there has been a high level of interest from brokers, particularly the commercial finance brokers. Having said that, mortgage brokers are increasingly looking at this space [since] although they deal with consumer loans, many of their consumer clients are business owners.
The Invoice Market pays an upfront commission of 70 basis points of invoice value for the first $500,000 of invoices funded, and a trail commission of 35 basis points of invoice value thereafter for as long as that client funds with TIM. This allows the broker to build a book as they do with other finance products that will continue to pay them income after referring a client to TIM.
