Tradeshift announce a $3 billion fund to support small business

Tradeshift announce a $3 billion fund to support small business

Posted by Pete Loughlin in Financial Supply Chain Management, Supply Chain Finance, Working Capital Management 10 Sep 2013

I’d grown accustomed to the sunshine that we’ve enjoyed in the UK for most of the summer and yesterday, ill-equipped for normal British weather, I got soaked, literally to the skin, in an unexpectedly heavy rain shower in London.

Summer’s almost gone and there’s definitely a change in the air. It’s been a long time coming but now the convergence of demand for liquity amongst cash strapped small businesses and the supply of alternative funds seems to be happening. There was some big news on these lines last week when OB10’s acquisition was announced. There’s a few new players joining the market that we’ll hear a lot about in the coming weeks. All of this is very interesting but today’s news is quite simply breathtaking.

Tradeshift signaled some time ago that they were going to be leveraging their platform to deliver some form of supply chain finance offering to support small businesses but today they’ve lifted the lid on their plans and revealed exactly what it is they’ll be doing. In a nutshell it’s this: $3 billion.

In more detail it’s this:

Purchasing Insight logoParaphrasing the press release, today, Tradeshift have announced a new deal with CapitalAid to launch a $3bn factoring business to help support SMEs. The deal will fund B2B transactions on the Tradeshift platform across all of Europe with a strong focus on the UK.

Tradeshift, the free to supplier network, claims the fastest growing network of connected businesses, has positioned themselves perfectly to facilitate this funding offering. The CapitalAid fund will be fully embedded into the Tradeshift platform, which already connects suppliers to large, global enterprises such as The NHS, Lear, DHL, and Vestas. The aim is to ensure that SMEs benefit from improved access to cash. At the same time large enterprises will gain from building stronger, more cash solvent supply chains.

“Access to cash has always been one of the hardest, yet most critical components to sustaining and growing any small and medium sized business. In recent years we’ve seen the rise of alternative funding options – from private funds to crowdsourcing. Tradeshift is in a unique position to bring another alternative financing option to businesses across Europe and the UK. This was the perfect opportunity to have a fund created for the Tradeshift platform,” commented Tradeshift CEO, Christian Lanng.

“CapitalAid is bringing a new funding solution to the market which is simple, fast and competitive and we’re confident its positive impact will be felt throughout Europe and the UK. There is an urgent need amongst small and medium sized businesses, not only for cash and liquidity, but also for innovation in the financing and lending space which is dominated by dinosaurs. The current models are slow and outdated and are failing those needing to sustain and develop their businesses. CapitalAid will address this failing and deliver the cash and liquidity  businesses need in order to prosper and grow,” stated CapitalAid CEO, Torben Pedersen.

Tradeshift claim that the integration into the Tradeshift platform of this new fund will be seamless and it will allow users of the software to benefit from real-time credit analysis based on the data that exists within the platform – uniquely from both buyers and suppliers.

This is an obvious move for Tradshift and I think they’d have done it sooner but they appear to be taking a measured approach in the launch of their platform apps. Whether it’s through luck or judgment, they’ve got their timing just right. There’s an appetite for this kind of thing and there even seems to be a political will to support these kinds of initiatives from what I see in the UK as well as the rest of Europe.

It’s going to be a very interesting Autumn.

Pete Loughlin can be found on twitter @peteloughlin

  • Enrico Camerinelli September 10, 2013 at 2:20 pm /

    Thank you Pete for sharing.
    What I read between the lines is a B2B network infrastructure (i.e., Tradeshift) that a funding provider (i.e., CapitalAid) will use to channel its lending solutions to a multitude of potential users.
    What I think is of interest of this announcement is the clear separation between the “piping” and the “funding”. This is good news since a “one fits all approach” hardly can break through the complexity of SMEs.
    As an SME I know now that if I jump on Tradeshift I will not only be able to exchange my e-invoices, but I will also have the possibility (I assume) to discount them or get some form of financing at convenient pricing because CapitalAid is able to run some analytics and assess my behavior as supplier.
    Nice value proposition but not really a ground-breaker. If I have to look beyond this announcement, I must expect a trend where Tradeshift will just focus on the “piping” (OK, an “intelligent” piping) and provide “hooks” to other funding providers that will put the money to finance especially SMEs. If this is the case, then my “B2B Payments Networks” model is getting closer and closer to reality.
    And that is what I believe the real value is all about: An interconnected set of B2B networks (i.e., the “piping”) that runs payments transactions, e-invoices, e-Trade Finance, and SCF instruments (i.e., the “financing”). Piping and financing will be provided by separate players, while payments-dedicated networks (e.g., SWIFT) will be left to take care of the inter-bank “last mile”.

  • Bill Laraque September 10, 2013 at 7:40 pm /

    This system/process with a lot of caveats is what is needed as a supply chain finance methodology in the US. Large banks are willing to provide SCF to multinationals as are ECAs. Third tier finance houses are happy to provide p.o. financing and receivables financing to SMEs at usurious rates of 24-60% p.a. SWIFT is deluding everyone into believing that its BPO, TSU, etc. functionality addresses the needs of SMEs.
    What is needed by SMEs however, based on 40 years of trade finance experience, is the financing of the Operating Cycle which includes inventory and work-in-process at moderate rates. Needless to say education on Denied Party Screening, OFAC Screening , anti-money laundering will have to be provided exporters. We will also have to prepare ECAs such as the US Export-Import Bank to process the expected growth of trade transactions being divested by EU banks and arising from emerging market economies.

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  • Tofte & Company | Our story so far September 28, 2015 at 7:50 pm /

    […] With Tofte & Company as advisors, CapitalAid completed its initial funding round raising over €2 million. The company, described as a ‘$3 billion factoring business’, has a partnership with Tradeshift to work with the electronic invoicing platform. Read the full article here. […]

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