Small business financing start-up Skippr has shrugged off concerns that the indefinitely delayed IPO of its venture-backed peer Prospa could put off investors in the sector, by attracting some of the local fintech scene’s biggest hitters to a $16 million debt and equity financing round.
Pepper group co-founder and former chief executive Patrick Tuttle and SocietyOne and Douugh co-founder Andy Taylor have both invested in the round, which is comprised of $1 million in equity from high net worth investors, and $15 million in debt.
Skippr was founded two-and-a-half years ago by former NAB senior corporate agribusiness senior associate and MarketInvoice team lead Alistair Lamond alongside former fund manager Patrick Crivelli, and, like Prospa, it taps into the gap for small business financing.
It’s main revenue driver is an invoice financing operation, which provides small businesses with loans based on their assets, and it also provides a small business cashflow forecasting tool to track, manage and predict finances in real time.
The Prospa float was postponed at the last minute for an undetermined period in June, following questions about whether its loan contracts had breached new laws. Mr Crivelli said the IPO failure was a case of “unfortunate timing”, which didn’t reflect on the strong business Prospa has built.
“We operate in a slightly different part of the market, our facility sizes are a bit bigger and our strategy is different,” he told The Australian Financial Review.
“We compete with them on some deals, but we’re not necessarily head-to-head.”
Scope to grow
Mr Crivelli said the financing market was largely dominated by firms that hadn’t traditionally invested in their technology systems. Therefore he believed there was a lot of scope to grow a company based on leading-edge tech.
Skippr’s loan terms involve an annual interest rate of 14-15 per cent and a drawn down fee of about 1 per cent.
This is between the interest rates of secured loans and the high rates charged by unsecured lenders. So far it has signed up 260 businesses to the platform and 110 accountants and bookkeepers.
Mr Crivelli said it took nine months to close the financing round, but refused to disclose who had provided the debt funding, beyond saying it was an early stage financial services business.
“The fundraising now means we can scale up and fund more small businesses and get them connected to our technology,” Mr Lamond said.
“For the next 12 months we are going to deploy around $40 million of invoice financing and get most of the debt facility out the door.
“The small businesses aren’t coming to us for one-off loans, it’s a revolving cash flow facility. The equity will go towards growing the team and building more of the technology.”
Mr Lamond predicted some consolidation between unsecured lenders in the markets in the next few years, with the bigger players such as Prospa likely to come out on top.
But he said there was still space for new entrants to invoice financing in Australia, with the size of the market locally much smaller than in comparable countries.
“In the UK debtor finance is 15 per cent of GDP, versus about 5 per cent in Australia,” he said.
“The hardest challenge and biggest impediment to growth here is the lack of understanding from the borrower. It’s still an esoteric concept for a lot of borrowers, so I think the education piece is super important.”