Tech start-up PeerPay has launched a new way of matching firms looking for growth finance with businesses who are willing to purchase their invoices through a cloud-based platform.
Larger, cash-rich firms within an accountant’s client portfolio can now finance smaller, client companies within the same community looking for money to grow through this new platform, called FloFunder.
The platform is the brainchild of an accountant, David Ireson-Hughes, a financial services exec, Michael King, and a technologist, Alan Burns an experienced technologist.
FloFunder allows small businesses to ‘sell’ verified invoices to larger businesses who use the same accountant, and receive between 95 per cent to 100 per cent of that invoice value in advance to support their cashflow. The seller retains control of their invoice ledger.
Unlike online invoice auctions where funders must bid and monitor each invoice, the process is entirely automated through the platform’s algorithm, which searches all registered funder’s return and risk criteria records, validates that enough funds are available, and automatically allocates percentages to every invoice.
This way, all funders get an equal opportunity to participate and can achieve their stated return requirements. It also ensures that all sellers get the best price.
“FloFunder is, in effect, a closed online dating agency between an accountant’s clients with cashflow requirements and clients who have cash to invest,” according to co-founder Ireson-Hughes.
At present, FloFunder is fully integrated into Xero’s accountancy platform. The service collects all historical and current information in the cloud accounting system to compile a risk profile for businesses seeking funding based on their invoicing and collection histories. These profiles are constantly updated based on real time performance.
“Accountants have clients sitting on cash doing nothing, and other smaller clients struggling to borrow cash at an affordable price. Putting the two together is a ‘win win’ for all parties: the seller gets an immediate injection of cash they need to grow; the buyer gets a percentage return on the cash he has invested; and the accountant takes a commission on the transaction and provides a service that binds both clients closer to their practice,” he explains.
The platform itself is free for accountants and can be white-labelled as required.
“The design of the fully automated matching algorithm using artificial intelligence is to ensure that any potential risk is spread across as many funders as possible, within their own designated criteria, to minimise the impact of any potential default,” Ireson-Hughes adds.
Buyers can choose a low, medium or high return profile and could reap returns of up to 18 per cent on their investment. The entry level for investors is £2,500, and the discount fee paid by the seller is comparable to traditional invoice finance providers.