A New Look at Bill Financing: A Look at GapCap

Alternative loans

The invoice finance space is becoming increasingly competitive. The alternative market has for some years been dominated by MarketInvoice and Platform Black. But in December, we learned that Assetz Capital, via a JV with The Interface Financial Group, was going to diversify into selective factoring. And now the so-called “new kid on the block” GapCap is also starting to gain considerable momentum.

The platform does not operate on a market-based peer-to-peer model. But invoices can be selectively financed. Invoices are funded quickly. The platform’s private investors enjoyed strong returns. And GapCap features some innovative aspects of its own design. For example, the platform has the ability to accept part of the interest payments in the form of excess goods or services provided by the client company.

Just to clarify the mechanism: the customer produces a good or service for a debtor and issues an invoice > GapCap advances a percentage of the value of that invoice to the customer > the debtor then pays the full value of the invoice to GapCap > rather than receive the full interest rate in cash at the start of the transaction, GapCap is able to exchange a portion of the interest rate for goods or services of equivalent value > GapCap sells these goods or services through its networks, which include the barter card network (an online marketplace for the exchange of goods and services between 55,000 member companies).

For an in-depth explanation of this feature and the platform in general, we caught up with GapCap Director Alex Fenton.

Can you briefly introduce the platform to us?

We are the new kid on the block, so to speak, in cash flow financing and facilitating SME growth. We combine a unique financing facility for SMEs with a business development and mentoring service. Our core offering is Selective Invoice Financing, but rather than submitting businesses to an auction platform, once invoices are accepted through our portal, we finance from within our fund structure, allowing the SME to plan ahead with precise its cost of financing and to the investors to be assured of returning to them.

The unique aspect of our financing offering is that we have developed ‘stock option financing’ – through which, through our unique partnerships, we can (only if the client wishes!) charges partial payment of our interest rate on our customer’s goods/services. This creates a true partnership as we not only become a more cost-effective financing option, but also a valuable new distribution channel.

We also have the ability to deliver additional value to the companies we fund – the business development and mentorship side of the business is built around a team of entrepreneurial mentors who “have been there and done this”, they seek to take a holistic view of a business and encourage growth by drawing on their own experience and expertise. These two core parts of the business work both separately and together, and both are designed to give our customers access to the key tools for rapid business growth – cash and expertise!

In practice: how quickly can your borrowers access financing? What is the range of rates they could pay? What are the terms? Do you require a certain caliber of debtor to be involved?

The fastest turnaround we’ve done is 28 minutes! But our goal is to give an initial assessment within 48 hours of receiving all relevant information and to release funds within 72 hours.

We require a certain caliber of debtor – we credit assure all our debts, so we need the debtor to be solvent up to the requested limit.

Our billing method is quite unique – we can (and usually do) charge a monthly interest rate per sector, but by being able to support partial payment for our customer’s goods/services, we become a much more cost effective financing option. , and in addition, we become a new distribution channel for our client, who we then introduce to the companies to which we sell their product, and facilitate other business through the GapCap relationship.

How is GapCap funded?

Until now, we were financed by individuals, but we are currently in full fundraising, which will allow us to provide cash assistance to more and more SMEs.

What do you think of the P2P model? Will GapCap be looking to install some sort of dynamic auction exchange for invoices?

We plan to continue to innovate and having technology systems at the core of our business is a key part of what we do and intend to do, but no, we do not plan to add a dynamic auction exchange. We truly believe in the fund structure where we do the hard work for the investor, naturally monitoring risks closely, but diversifying the portfolio, continually reinvesting in the right risk, to achieve the overall returns, while maintaining a level of liquidity as well. . That said, I’m a true champion of P2P as a concept. For too long private investors have had funds in the bank on which banks have made a lot of money. By removing the middleman, P2P not only allows investors to get a better return, but it also increases risk appetite because the SME is not loaned by one entity, but by several as one aspect of a diversified P2P portfolio. .

What do you think is the biggest innovation: selective bill financing or P2P?

P2P and the technology around it challenges established lending and investment structures – to that end it is undoubtedly the greatest innovation, and the scale of P2P and the rate of growth is impossible to ignore. However, in the area of ​​receivables financing, Selective Invoice Financing has set a milestone, allowing SMEs to receive the cash boost they need in a more flexible, transparent and cost-effective way. That’s not a bad thing!

Is GapCap a regulated entity?

No, we are not regulated at this stage.

What could the government do to better support the online bill financing space – and specifically your platform?

It would be very useful to put in place a tax-efficient structure for private investors wishing to lend to SMEs, even in the short term. If the government really wants SMEs to be the cornerstone of our “Innovation Nation”, consideration should be given to providing more incentives for investors to contribute working capital. There have been many high-level partnerships between banks and alternative lenders, which is great, but I think it is essential that the government encourage more diversification of the options available to an SME seeking finance. For us, the two elements above would support us well!

Where do you see the platform in a year?

We are an ambitious group and we have big plans for additional products, new partnerships and technological and financial innovations, but the heart of our work is educational work, informing SMEs of the different options, and I would consider that as a successful year if we had simply contributed to making this space better known as a whole. It may not sound ambitious, but as business owners and entrepreneurs become more aware of the options available, for many, once they become aware of what we offer, it will be a no-brainer and therefore , our company will successfully help many other SMEs. with their growth.

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