New innovators: InvoiceFair

Those who have grown up with the traditional banking system often assume it has all the answers to a company's financial needs. Not so, according to Helen Cahill, cofounder of the fintech start-up InvoiceFair.

“In our view, the traditional financial services sector is unable to meet two key market demands: the provision of flexible short-term credit lines on a transactional basis and the ability to offer very attractive returns to professional investors for their short-term liquid cash,” she says.

Cahill and cofounder Philip Hickey started working on the idea for InvoiceFair in 2014. The software for their online technology platform was developed (in Ireland) over this period and the business went live in March this year.

InvoiceFair employs four people, with two more jobs coming on stream in the near future. Investment to date has been about €300,000 and the company has received support from Enterprise Ireland under its high-potential start-ups programme.

Cahill has a long track record in treasury risk management, while Hickey’s background is in non-bank working-capital provision. There is a growing trend internationally towards using technology to provide companies with alternative forms of finance, and InvoiceFair is part of this fast- developing niche.

“Technology is the great enabler of our times, and while we believe there will always be a role for the banks, advances in technology will permanently change relationships between them and their customers,” she says.

Fast access

Cahill estimates there are thousands of Irish companies that want fast access to working capital. However many are unwilling to hand over their entire invoice books to banks or discounters. InvoiceFair allows companies to sell one invoice at a time and to have their money within 24 hours.

“Handing over an invoice book is a big step as it reduces companies’ control, it’s time- consuming, it incurs significant hidden costs and often requires personal guarantees and collateral,” she says.

“With our system, companies can sell a single invoice and can fix a minimum reserve price and attract a buyer without debentures or personal guarantees. This allows them to accelerate their working- capital cycle, release cash flow and continue to focus on growing their business.”

InvoiceFair’s target market are small to medium enterprises that typically bill more than €10,000 per invoice. It charges companies 1 per cent of the invoice value to use its platform. The invoices are then auctioned online to a panel of local and international investors who bid to buy the invoices.

InvoiceFair’s initial customers are Irish companies from a number of sectors, including pharma, ICT and construction. However, the invoices relate to debtors all over the world, and the company plans to offer its service internationally.

Cahill says the system has appeal for professional investors, primarily, because of its transparency and potentially good return. The platform can be used by companies from any sector so investors can choose an industry and companies within it that they want to do business with.

“A further attraction is the liquid nature of this low-risk investment, where the investor typically can earn a return after 45-90 days,” Cahill says.

“With bank deposit rates on the floor, such an investment can deliver yields that are a multiple of current deposit rates. We believe invoices will become a new asset class in Ireland and a permanent feature of an investor’s portfolio approach to yield and diversification of returns.

“Right now there is an abundance of latent capital trapped in our banking system that’s not providing wider economic benefit.”

Cahill believes all companies should use invoice trading to widen their funding base and reduce their dependency on the banks. “Successful companies do not put all their eggs in one funding basket. They build up a diversified portfolio of options,” she says.