Arex, a startup that is taking a marketplace approach to invoice financing for SMBs, thus helping creating another asset class for investors, has picked up €3 million in backing. Leading the round is Finland’s Lifeline Ventures, alongside London-based LocalGlobe, and various unnamed angel investors.
Currently launched in Finland but with plans to expand to the U.K. at the start of next year, Arex — which stands for ‘Account Receivables Exchange’ — is setting out to offer another way for “cash-squeezed SMBs” to access short-term finance.
At the same time, rather than simply moving the traditional invoice financing model online, the startup has built a “live, automated and algorithm-based trading exchange” that lets an SMB set the discount at which they want to sell an outstanding invoice and have investors bid in realtime to offer the best rate. Arex charges 0.25 per cent per invoice financed.
“We solve cash flow problem of SMBs by creating a live, automated and algorithm-based trading exchange where companies can set their own prices for their invoices,” explains Arex co-founder Perttu Jalkanen. “Arex is enabling both SMBs, and the larger corporates who use us, to instantly turn their unpaid invoices into cash”.
The startup reckons it has also come into existence during a “perform storm” that is seeing small and medium-sized companies struggle with liquidity more than ever.
That’s because, says Arex, post-credit crunch measures have been introduced to strengthen the regulation, risk management and supervision of the banking sector and that this has choked off the supply of money banks have available to lend to businesses.
Running alongside this, there has been a “fundamental operational shift” that is seeing SMBs move away from acquiring fixed assets such as real estate, in favour of leasing or subscribing to products and services instead, placing even more strain on working capital.
“For SMBs Arex offers total control over the terms of their financing,” adds Jalkanen. “Meanwhile, because modern technology enables the automation of many processes such as credit ratings, collection and accounting, the cost savings can be passed onto participating companies and investors”.
LocalGlobe’s Robin Klein says in a statement: “Arex are yet another example of the ambition and brilliance of execution so evident in the Nordic fin-tech sector right now. They are a team with proven pedigree and a huge mission in a market that’s poised for enormous change – and we’re very excited to be working with them.”