Asian Fintech start-ups are going strong, 2 have recently been funded and their stories are detailed below – these are our favorite type of success stories in Asia, covering many aspects of our business – start-ups, SMES, equity and loan funding.
Asian Fintech companies are providing SMEs with loans and bridging a gap at the smaller end of the market which banks were not supporting following the 2008 financial crash. I believe the banks will be rueing the day that they let these smaller players enter the market, they are quickly getting market share and learning the ropes very quickly. Meanwhile the banks are suffering and losing business to start ups from crowd funding, loan funding, mini bonds.Many businesses are likely never to go to banks for finance or advice again.
The first lender funded, ApexPeak is based in Singapore. It provides loans to SMEs based on a factoring model -nothing new in that, I used a factoring bank in Hong Kong more than 20 years ago, the difference and the ‘fintech’ part of it is that ApexPeak seems to be using some credit scoring and advanced techniques to assess the credit risk of the invoices they are ‘buying’. Factoring works where the lender essentially buys your invoices for, say, 80% of the face value, and then collects the invoices directly. They pass you the 80% on issue of the invoice, then the balance 20% less a fee (in this case 3%) when the full invoice is collected. Of course the key is in the detail, and dependent on their assessment of you and your client base, they may reduce the 80% to a lower number, or the fee may be higher. In common with the Hong Kong company below, they do not state on their website the interest rate/APR on the funds they lend you which is a flag to watch for. In addition, there are two ways to work with factor companies, non-recourse or a recourse lending, the first where the lender takes the risk on the invoice being paid, the second where the invoicer takes the risk. Clearly you’d like all your invoices to be factored on a non-recourse basis since you no longer bear the credit risk, but tt’s not often they will give non-recourse loans – although we used to be able to get those on major accounts, for example Wal-Mart, for a higher fee.
The second business is a Hong Kong based Fintech business, Advanced Merchant Payments (now renamed Amplifi Capital). They provide loans to smaller companies (restaurants, beauty salons, retailers, dentists etc), where the company receives a large proportion of their receipts via credit or debit cards, or some kind of intermediate bank transfer. Loans are for up to US$320,000 and are repaid on a daily basis. I’m assuming therefore that Amplifi take those intermediary bank payments directly, take the loan repayment and interest, then pass the balance to the borrower. As above, they do not clearly state the interest rate/APR in their website therefore I assume the rate is not great, but it seems simple and can be done quickly online.
For further details refer to links below :
ApexPeak funding and background article
Amplifi (AMP) funding and background article
SME News Asia
If you are interested in the support we can provide SMEs learn more at CFO Counsel Asia
