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p>A new SME lender, with revenue-based financing, has launched a new term loan with flexible features.
Fleximize launched in January offering revenue-based financing to small and medium-sized businesses where repayments are tied to a client’s revenue flow – paying back more in good months and less when income drops.
It has now added the new flexible product to its offering aimed at businesses in the finance and insurance sector that prefer to know in advance what they have to pay each month and exactly how long it will take them to repay their loan.
The new ‘Flexiloan’ is a term loan allowing customers to know how much they have to pay each month and when it will be repaid. However, there are no penalties for early repayment, and after three successful payments clients can take principal repayment holidays and pay only interest for up to two months. Clients can also request their loan to be topped up.
Max Chmyshuk, Founder and Managing Partner at Fleximize, said: “Our initial revenue-based financing (RBF) proposition has proven to be very popular, and we have had hundreds of applications in our first few weeks of operating and have our first clients on board. The launch of our Flexiloan builds on this and also our philosophy to capitalise on the weaknesses of many mainstream lenders in terms of their inflexible terms and conditions, and the limitations of their risk profiling which means they reject some applications that are actually low risk.”
Revenue-based financing is often referred to as non-dilutive financing or royalty-based financing, and sits between debt and equity investment. The value of monthly repayments fluctuates with the performance of the client’s business so they pay more in good months and less in bad ones.
This is in contrast to the traditional fixed-term lending model used by banks and direct lending companies where monthly repayments are fixed and could damage the finances of small businesses in months when revenues drop unexpectedly.
Fleximize has also published new research on the extent to which banks are rejecting loan applications from businesses, and how difficult SMEs are finding it to secure funding.
New analysis of industry data by the lender reveals that around £16.22 million of business loan applications by businesses in the finance and insurance sector were rejected during the third quarter of 2013 alone. The UK-wide figure was around £787 million. Around 22 per cent of applications from small businesses were rejected, and the corresponding figure for medium sized enterprises was around 9 per cent.
Fleximize is looking to capitalise on the fact that it believes many financially strong and viable enterprises are being rejected for loans because they do not fit the strict criteria applied by many banks. By using significant amounts of data available from online platforms and marketplaces, Fleximize has developed its own unique credit-scoring model that, as well as traditional credit data, also incorporates numerous aspects of an online seller’s history that a regular bank would disregard, including revenue history and buyers’ reviews/feedback.
The new research also reveals the scale of current problem of banks not lending to SMEs
Fleximize research with SMEs also highlights the problem with funding. Some 17 per cent of SMEs claim that they have been refused credit in the past three years, and one in five of these described the financial health of their organisations at the time of applying as ‘strong’.
Around 17 per cent of SMEs said that over the next 24 months, they would consider ‘alternative’ and ‘new’ types of funding for their organisations. Of these SMEs, 55 per cent said that they would do so because they offer more flexible terms and conditions than mainstream lenders, and 6 per cent said it was because they have been refused credit by a mainstream bank or building society.
Chmyshuk added: “Many financially robust SMEs are still finding it difficult to secure funding. A number of banks either pulled away from this market or kept their SME loan portfolios stable. As the UK economy recovers, the demand for credit will inevitably grow; and where banks leave a void, innovative finance companies like Fleximize see an opportunity. We predict that in the next 5 years the market will see more competitive and innovative solutions in the SME space.”
Fleximize’s proposition is primarily designed to serve small under banked businesses, including those operating in the e-commerce space. As a result of significant amounts of data available from online platforms and marketplaces, Fleximize was able to develop its own unique credit-scoring model that, as well as traditional credit data, also incorporates numerous aspects of an online seller’s history that a regular bank would disregard, including revenue history and buyers’ reviews/feedback.
A new SME lender, with revenue-based financing, has launched a new term loan with flexible features.
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