MarketFinance Secures $383M Funding for SMB Online Loans
Addressing Cashflow Challenges for Small and Medium Businesses
Small and medium businesses (SMBs) frequently encounter difficulties related to cashflow. However, this already challenging situation was significantly worsened for numerous companies during the COVID-19 pandemic.
MarketFinance Secures Significant Funding
Now, a U.K.-based startup known as MarketFinance – which has developed a lending platform designed to support SMBs during financially constrained periods – has announced a substantial funding round of £280 million ($383 million). This infusion of capital is intended to prepare the company for an anticipated increase in lending applications.
Strategic Timing for Lending
“The beginning of the economic cycle represents an opportune moment for lending,” stated Anil Stocker, CEO and founder, in a recent interview.
Funding Breakdown
The majority of the funding will take the form of debt – funds loaned to MarketFinance, which will then be lent to its customers as an approved partner within the U.K. government’s Recovery Loan Scheme. An additional £10 million ($14 million) will be allocated as equity to further enhance the platform’s capabilities.
Investors and Strategic Partnerships
Italian bank Intesa Sanpaolo S.p.A. and an undisclosed “global investment firm” are providing the debt financing. The equity portion is being spearheaded by Black River Ventures – also an investor in Marqeta, Upgrade, Coursera, and Digital Ocean – with participation from existing investor, Barclays Bank PLC.
Barclays maintains a strategic investment in MarketFinance, as the startup powers the bank’s online SMB loan services. Northzone is also among the investors in the company.
Company Valuation
While the company is not officially disclosing specific figures, it is understood that MarketFinance’s valuation falls between $250 million and $500 million.
Profitability and Sustainable Growth
Stocker highlighted that MarketFinance has been profitable since 2018, contributing to the limited equity dilution in this funding round. “Our focus is on building a sustainable business,” he explained. “The equity raised will enable us to secure more favorable debt terms and strengthen our balance sheet.”
The funds will be allocated to new product development, marketing initiatives, and the continued expansion of its API connectivity.
The Rise of Embedded Finance
This API development is particularly significant, aligning with the growing trend of “embedded finance.” This involves third parties offering loans to their customers through their own platforms, powered by MarketFinance – a model similar to the existing partnership with Barclays. The potential reach of this approach is vast, encompassing a wide range of online businesses.
Embedded finance promises that any online brand serving SMBs could potentially extend loan offerings to facilitate increased business interactions.
From Invoice Finance to Comprehensive Lending
MarketFinance initially launched as MarketInvoice, focusing on providing short-term loans to SMBs secured against their outstanding invoices – a practice known as invoice finance. The initial goal was to address immediate cashflow issues by leveraging unpaid invoices, which were expected to be settled eventually.
Expanding Financial Solutions
However, the startup recognized a larger opportunity in offering financing for more substantial amounts and supporting broader business expansion objectives. Following a previous equity round, MarketInvoice rebranded as MarketFinance to reflect this expanded scope, while continuing to offer its invoice-based product.
COVID-19 and Increased Demand
This transition proved timely, although the circumstances were unfortunate. The COVID-19 pandemic dramatically altered the business landscape, with SMBs facing unprecedented challenges due to cashflow problems and limited capacity for diversification.
This situation created a significant opportunity for MarketFinance.
Responding to Pandemic-Related Needs
Stocker noted that during the early stages of the pandemic, a large proportion of loans were used to manage business disruptions caused by COVID-19, including closures and reduced customer activity. “The key was providing frictionless access to funding,” he said, emphasizing the use of technology to streamline applications and reduce approval times from weeks to days.
Current Challenges and Ongoing Support
While last year focused on stabilization and adaptation, Stocker observes that businesses are now grappling with supply chain disruptions, Brexit-related complexities, and labor shortages. “These challenges make it incredibly difficult for them to operate effectively.”
Demand for loans remains exceptionally high, with monthly requests reaching as much as $500 million. MarketFinance maintains a selective lending approach, prioritizing businesses with a strong likelihood of repayment.