ApexPeak

How this Fintech startup is plugging the SME funding gap

Among the financial technology (Fintech) startups aiming to disrupt the traditional banking sector, Singapore-based ApexPeak is set on resolving the funding gap faced by small and medium-sized enterprises (SMEs) worldwide.

Access to funding has long been an issue for start-ups and small businesses, with 2008’s global financial crisis further crimping the ability of banks to lend, resulting in SMEs facing great difficulties in obtaining much-needed funds.

“The regulatory-strained banking sector pulling out of trade finance and inefficient bank underwriting processes presented a huge gap, especially in the Asia-Pacific, Middle East and Africa (APMEA) markets,” Gakim Solomons, president and CEO of ApexPeak, told CNBC by phone.

“We want to be an innovative financier that keeps capital working by utilizing real-time underwriting technology and structuring of risk to offer one of several flexible line of credit products,” he added.

The three-year-old startup functions on a model called “invoice discounting,” which involves a company selling its receivables to ApexPeak for around 80 percent of the total value and a 2 percent processing fee.

A transaction can be processed as quickly as seven working days, according to Solomons. ApexPeak has completed 800 transactions in Asia and 7,000 in Africa since 2012.

ApexPeak

It is this speed, and an absence of capital requirements that attracts SMEs, such as Singapore-based big data solutions provider Knowesis.

“We have a healthy PNL (profit and loss) so our problem is not that we don’t have money, but we have a lumpy cash flow. Some months, we have large revenues, but sometimes we have none. We are a small start-up so when we approach banks, they might not even look at us,” Mark Radford, managing director of Knowesis, told CNBC.

But ApexPeak looked past Knowesis’ erratic cash flow as its portfolio consisted “blue chip firms,” such as Singapore Telecommunications Ltd., Radford said. Knowesis obtained 400,000 Singapore dollars(around $292,000) in about four weeks.

“The [transaction] was extremely fast according to bank standards, which may take months. They understood we had done the work; it’s just that we haven’t got the payment and since we’ve got some blue chip customers, there are no risks,” said Radford. “Compared to banks, this is almost a no-brainer [alternative] for us.”

Managing risks

To be sure, this invoice discounting model is not risk-free.

Fintech companies such as ApexPeak risk taking on fraudulent invoices where buyers default on payment or suppliers fail to deliver goods, OCBC’s head of cash management Greg Trotter said.

To minimize such defaults, ApexPeak conducts background checks on its clients and essential documents, such as purchase orders. The company also stepped up due diligence by acquiring Dubai start-up Cashnomix in January and completing the takeover of Netherlands-based ASYX this month.

ASYX uses cloud-based supply chain finance and a collaboration platform to limit the risks of financing fake transactions, while Cashnomix uses a data-driven credit scoring engine to assess success or failure rates, Solomons noted.

“It’s been quite efficient,” said Solomons, adding that the Singapore-headquartered firm has a default rate of 0.5 percent to date.

Expansion plans

ApexPeak’s expansion plans are also geographically ambitious, with the company eyeing opportunities in Southeast Asian economies such as Malaysia, Indonesia and the Philippines.

“At the moment, Southeast Asia provides the most attractive prospects by virtue of a high digital adoption rate,” he said.

Interestingly, the micro-lender isn’t eyeing expanding into China, the birthplace of one of the most successful fintech players: Alibaba and its online payment service Alipay.

“There’s no doubt in our mind that China is huge, but we haven’t reached the stage where we can consolidate our business in Southeast Asia and take on China. [If we want to enter China,] we have to build up a strong position [to take on] the local players [in terms of] resources and funding,” Solomons told CNBC.

“Currently, how we’re playing the China story is via clients in Southeast Asia or Africa/Middle East who do a lot of business in the mainland. We have a number of clients who procure goods from China and that allows us to tap into the supplier business community,” he added.




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