We spoke to Toby Lanyon, the co-founder and current CTO, as well as Guy Willans, COO of Trade River, which operates in EMEA, and with it’s sister company, Trade River USA in North America.
How have you seen the bank landscape change in the last 3 years?
Toby: 3 years ago, bank lending, particularly to SMEs was declining rapidly, indicating scant appetite for the sector. That trend has stabilized somewhat and some clearers are indicating revived appetite – Lloyds is a good example. In addition, the challenger banks are making headway – albeit from a low base.
What are your clients telling you about their experiences with Trade River? Why you?
Toby: With TradeRiver? Once using us, the feedback is universally positive.
Guy: Also given the ease of use they wonder why they did not do it earlier. Our customers generally are needing to grow and cannot obtain an increase in funding from their banks due to; lack of security, lack of appetite for the opportunity/specific transaction, lack of understanding of their business or the banks belief it should be fully funded by equity funding.
Tell us about a specific TR example
Toby: An importer for the mid-range garment trade called, asking why “he had not been doing it this way for the past 40 years” – praise indeed!
Guy: We can fund things Banks cannot, such as media spends, lawyers, speculative transactions and freight forwarders – in fact any goods or services, with no security.
What do Trade River do and how do they differ?
Toby: TradeRiver provides buyers at any point in a supply chain with a pre-approved revolving credit facility that can be used by buyers to act as a cash buyer from one or more suppliers anywhere in the world
How do we differ? Well, in short, we provide:
- A new source of working capital for buyers
- Accelerated, non-recourse payments to suppliers anywhere in the world – without supplier credit checks
- Sign-up, Payment & administration are paperless and transparent
- Uniquely, goods/services are separated from the payment for them
- Supply chains benefit from levels of speed and flexibility that are simply not available from traditional bank-based finance
- Existing finance lines are not affected
- Since each transaction is underwritten, no security is required from the buyer
Guy: In effect we provide a working capital facility (revolving) for clients to pay their suppliers, it is simple, quick and paperless. It is unsecured and in addition to any existing facilities – it does not impact them.
Where do you think an unsecured revolving credit facility is needed, in particular, the company type and point in life/trade cycle?
Toby: The answer has to be anywhere in a supply chain which currently has to be financed by cash or security. Since TradeRiver will provide funding at any point chosen by the customer, the benefits are of broad appeal – across diverse sectors and at funding points anywhere from pre-manufacture to after delivery – and at any point in between.
Guy: This is needed in growing entrepreneurial companies where they have pinch points in working capital or where their growth demands are restricted by existing bank facilities.
Do you feel that alternative working capital lenders will grow alongside the banks or will you see the banks slowly shrinking in this space?
Toby: Recent developments suggest that banks will make more efforts to grow alongside the alternative lenders and are likely to acquire the technologies of the more successful models.
Why can the banks not do what companies like Trade River are seeking to achieve?
Toby: Lending to SMEs is not always easy, so there is the question of appetite with restricted budgets. Regulatory pressures (particularly capital adequacy requirements) are also deterrents which are not applied to alternative lenders, giving them more freedom to approach a wider market.
Guy: Banks are also neither fleet of foot nor able to make decisions quickly.
How have you seen the growth trajectory of the companies that use your facility compared to before?
Toby: It is difficult to generalize, but in one example, we helped a £600k turnover business grow to £6M in less than 3 years!
Do you think this is just a UK trend?
Toby: Absolutely not. The US is a good example of how far and fast the sector can grow. I expect the next big growth story to be Europe.
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