Dutch FinTech Facevalue introduces a unique accounts receivable finance solution for European SMEs that challenges traditional factoring. Facevalue offers complete flexibility to its clients to determine which receivables they want to sell and charge no fixed fees. Most factoring solutions to SMEs require that the business sell all their outstanding accounts receivables to the Financier for a fixed period, usually two years that includes high fixed costs.
“The banking landscape has changed so much over the past decade that it has become a real challenge for most businesses to present their business case to lenders. There is often no one to receive their application, let alone understand the dynamics in their business and by the time the application is assessed, it is already dated. Facevalue has built a secure online platform that extracts invoice data, handle the mapping and conversion of data formats and lists all our clients’ outstanding accounts receivables in a ledger from where they can configure rules, or choose manually which receivables they would like to sell immediately and without recourse.” – Neels Bornman, Chief Executive of Facevalue.
Facevalue performs a pivotal role as a trusted market platform between businesses and investors. The company has developed the capability required to scale using advanced technology to address what is one of the biggest business finance opportunities in the world today. Accounts receivable finance is a vital tool for markets to recover. It is expected that the global transaction value will eclipse pre-pandemic levels and continue its meteoric rise and still it only accounts for an approximate 10% adoption.
Bornman: “The stop start economic recovery as markets open and governments try and manage the impact of further Covid-19 infections makes it incredibly hard for businesses to predict inventory and liquidity. We believe that businesses’ top priority will remain the protection of their available liquid resources. Adopting a flexible finance solution as part of a recovery and growth plan should be part of every business’ strategy during these uncertain times.”
According to the industry body FCI, accounts receivable finance has grown at an annual compounded growth rate of 7% over the last twenty years from €600 billion at the turn of the millennium to €2.7 trillion today. The market declined 7% worldwide during the pandemic, but the Netherlands still managed to grow by 1.4%. Europe accounts for 68% of worldwide accounts receivable finance dominated by France, Germany, UK, Italy and Spain that account for 70% of the European market.
(Source: FCI Annual review 2021)
According to PWC’s recent working capital reports, there is more than €1.2 trillion excess working capital tied up in global balance sheets, which if addressed would lift overall return on invested capital to 8.8%. 14 out of 17 industry sectors analysed deteriorated in net working capital days over the last year. Industries that would benefit most from release of cash from revenue are Retail, Engineering & Construction, Healthcare, Technology and Automotive.
(Source: PWC Working Capital report 2021)
Europe is also one of the hardest hit regions by the pandemic where revenue declined by 23%, inventory days increased by 15% and working capital performance deteriorated by 8 days. While companies improved their ability to generate cash from operations, profit margins are at a four year low and debt rose considerably as companies hoarded cash to weather the storm. (Source: PWC Restructuring and Recovery report 2020)
“Our research of European cross-sector mid-market corporates show that even before the pandemic, revenue was up year on year but even then companies struggled to convert revenue to cash. In addition capital expenditure as a percentage of revenue has continued to decline, which implies that companies are managing cash by not making capital investments. During the pandemic, revenue declined and is now only starting to recover. We predict that capital expense will remain a low priority while cash flow management becomes the number one priority”, commented Neels Bornman.
Many businesses are reluctant to utilise receivable finance solutions as part of their financial planning due to the comparatively high fixed costs it attracts. By removing the rigid nature and fixed costs, Facevalue delivers a solution that should form part of every business’ strategic planning regardless of its size. There is a direct correlation with the increase of an enterprise’s value and the effective management of its working capital.
Selling a receivable to Facevalue is as easy as emailing the invoice straight from an accounting system to a dedicated email address we create for each client. The platform uses a combination of optical character recognition (OCR) and artificial intelligence (AI) to convert a PDF invoice to a Peppol compliant structured electronic invoice. New clients can immediately sell their top priority receivables while Facevalue perform a detailed credit assessment whereafter a facility of up to €5 million can be approved for SME’s across the European Economic Area and the United Kingdom.