“The vetting process done by InvoiceFair on Human+Kind provided the credibility and comfort to investors which helped us receive competitive funding from a large Pool of Institutional Funders”
A recurring theme in business today is the frustration SME’s experience trying to access finance. Companies spend most of their time and energy on sales and winning that large contract, only then to face the challenge of how to finance it? Our client secured a multi-million euro sales order with a large United States (US) based business. The opportunity was huge, a relationship with a new distributor resulting in their skincare brand being visible to millions of consumers across the US – a true game changer. The core challenge for our client, they were unable to access finance to pay their main Supplier upfront. InvoiceFair enabled the company to leverage on the blue-chip Purchase Order from their US customer. They were able to sell the Purchase Order or Future Receivable to a Pool of Institutional Funders to finance the order. As the deal was time critical, funding was secured within 5 days.
How to access funding to fulfil a significant customer order? The challenge is even greater where your Supplier requires upfront payment but your balance sheet is weak, your cash resources are exhausted and you have fully utilised your credit line. In addition, at first view your customer looks weak with the Credit Agencies and to top if off, the time line to confirm the order is days and hours!
Human+Kind had worked tirelessly to develop a relationship with their US customer. The result was a Purchase Order for their core product to be sold within a range of health and beauty products to millions of US consumers. Almost immediately, Human+Kind recognised their challenge. The size of the order exceeded their credit limit. They could not pay their main Supplier upfront and essentially, were unable to finance the order.
InvoiceFair had to:
- Confirm the financial strength of the US customer in the absence of published financials
- Ensure the Belgium Supplier had the capability to deliver the units
- Provide the Supplier with the comfort and security that they would get paid
- Establish the investment appetite of the ‘Pool of Funders’ through an ‘Expression of Interest’ invitation setting out the facts of the business contract, financials of the trade, potential risks and return
- Give the Pool of Funders confidence in the trade with a show of financial commitment from the shareholders or ‘skin in the game’
Through a Non-disclosure Agreement the US customer shared their financials and disclosed that they were closing a substantial Series A Funding round. The financing would be used to expand product offerings, evolve their platform as a launchpad for brands, and fuel the company’s continued global expansion. The credentials of the customer had been established.
The Supplier, a privately held company based in Belgium working with large brand names such as Galenco, Biodermal, AHOLD and Watsons on their cosmetics, toiletries and other care products. A detailed supplier validation process carried out by Human+Kind, with subsequent clarification by InvoiceFair, established a track record of delivering orders of the size comparable to this order.
- The agreed upfront payment would be held in an escrow account with the Suppliers bank. Funds would be released as containers were shipped. Supplier trust and confidence was established.
InvoiceFair prepared an ‘Expression of Interest’ invitation having secured commitment for 15% of the required amount from one of the Human+Kind Shareholders. Before talking to InvoiceFair, a similar amount had already been considered as additional equity or a loan to the company. The Shareholder now recognised the value of purchasing a tranche of the Future Receivable as it would influence the Pool of Funders, would underpin his investment and also earn a return. Within 5 days commitment from 10 Buyers had been obtained and the Project was funded.
This trade was the direct result of a highly customised solution combined with the financial expertise and strict adherence to governance of InvoiceFair – alongside an ambitious business with a fundamental belief in their capability.
Key to the Solution:
- InvoiceFair confirmed the financial strength of the US customer through a direct view of their financials and disclosure of the significant funding round.
- Establishing the capability and confidence of the Supplier with regard to this order by directly verifying the logistics of production, shipping and payment method and scheduling.
- Laying out all aspects of the business contract and the trade to the Pool of Funders to assess and secure their investment interest in the deal. This included a comprehensive overview of all the stakeholders involved, their financial background, track record and the specifics of this transaction and how the various risks were being mitigated.
- Finally, showed evidence of financial commitment in the deal by one of the Human+Kind shareholders by their purchasing a tranche of the Future Receivable – effectively securing buy-in from the Pool of Funders.
“The decision by one of the Human+Kind shareholders to purchase a tranche of the Future Receivable (Purchase Order) brought other funders to the table.“
Peter Brady CFO & Co-founder InvoiceFair
A Pool of Institutional Funders
The fact that Human+Kind could access a Pool of Funders, not just one finance provider, delivered significant benefits to their business, specifically:
- No restriction was placed on the size of the sales order they could fund
- No restriction was placed on funding due to the geographic location of their customer in the United States (US)
Trading the Purchase Order of this contract irrespective of size is a powerful catalyst for growth. Armed with this knowledge, Human+Kind has the confidence to tender for business with a blue-chip customer of any scale globally.
This is a true catalyst for growth. This source of funding and the flexibility it has can be integrated into any business development projections and ultimately drive the bottom line.
“This source of funding is fast and agile and is an incredible catalyst for growth, ideally suited to ambitious SME’s with blue-chip customers.”
Peter Brady, CFO & Co-founder InvoiceFair