Member Spotlight: Boozt24
Started as Trefi Finance in 2013, Boozt24 uses a fintech solution providing financing to B2B companies with the specific aim to encourage them to grow further whilst reducing the risk and cost. To do so, Boozt24 finances companies based on their invoices, built on one of the most revolutionary finance engines from Capital Tool Company, which was awarded in the category for most innovative SME-financing solution from President Obama in 2010.
Florus van Herpt, responsible for Sales and Funding in the Netherlands, is confident that this solutions will be one of the largest game-changers in SME-financing. Boozt24 can finance companies based on forward looking data, exposing itself to less risk, while also giving companies the financial leverage to grow at a lower cost of capital.
Providing financing solutions to SMEs has generally been the domain of retail banks whose business models and interests don’t align well with the needs of a small company which is looking for working capital and the funds to fuel its growth. Lending is often provided on the basis of financial information like annual reports and updates from the company: backward looking data delivered with a significant time lag. The nature of this data means that a bank will generally be wary to provide immediate financing beyond the credit line, as it hasn’t observed what’s going on in the business in the first place, viewing increased financing needs as a risk instead of a growth opportunity.
But when things turn sour, banks will quickly withdraw any existing credit lines when its views that market conditions are worsening, while the counterparty does still need the liquidity to meet its obligations. This credit crunch was one of the factors which worsened the post 2007 crisis as countless companies defaulted on the sudden reduction in available credit. For big companies featuring on the AEX or the FTSE, this has barely been the problem: next to bank loans, they can acquire funding through the capital markets in the form of bond placing and/or the sale of shares, but SME lack this luxury, leaving them at the mercy of an inflexible working partner and an unfavourable position to negotiate fees. Boozt24 provides the answer for companies which are looking for a way out of this trap by employing state of the art technology and sound modelling.
To solve this incompatibility between bank and lender, Boozt24 provides financing based on safe forward looking measures: the daily performance is measured quantitatively as well as qualitatively based on its outstanding invoices and incoming cash flows. Not just providing active factoring like some incumbents currently offer to their clients at present, the service provided by Boozt24 is based on a platform where financing is provided by partial upfront payments on their invoices dependant on the credit rating of the company and its debtors The invoices are then securitized and sold to investors on the capital markets (listed on Euronext) in order to provide adequate funding and not dependent on banks.
In addition, the platform Boozt24 provides to its customers gives them the option to invite their business partners, so that Boozt24 can further assess the quality of outstanding invoices and the probability they will be paid in full, increasing the amount companies can receive for their invoices from Boozt24 (network effects). This feature of rewarding good behaviour and providing benefit from a durable relation on the financing platform can also act to encourage companies to improve their payment behaviour, which benefits the entire network. The lower risk-level also allows Boozt24 to source capital at a lower cost than conventional financing, because the capital markets which fund Boozt24’s platform view this instrument as significantly more secure than traditional debt solutions, requiring a lower risk compensation for their investment.
The mission of Boozt24 links well with the philosophy of Holland FinTech, as both parties view that one of the main spearheads of fintech should be the democratization of finance. Their attempt to support companies with its innovative method of financing has also been noted by the Dutch Government, which has granted a EUR 50 million guarantee on outstanding lending, making Boozt24’s outstanding bonds one of the safest securities one can buy in market. By opening up the capital markets to SMEs in a safe and responsible manner, Boozt24 is giving a lot more financial power to the small cogs in our economy.