Time to Clarify the Confusion around Alternative Business Finance

Alternative Business Finance Watch List LogoWe have all seen the lists – the 50 hottest fintech companies, the Best Payables Supplier Financing Solution Platform, the 25 fintech vendors set for stardom.

I am not sure how many of these are pay to play lists, but I have found some of them to be confusing at best.  See my post on the Confusion around Fintech Lists 

What I find confusing is these lists that throw companies together from all walks of life and rank who is best in innovation or some other criteria.  It ends up being an alphabet soup of vendors who have very different business models and value propositions to companies.  I’ve seen lists that include equity crowdfunding platforms, retail bank platform providers, asset creators, wealth managers, peer to peer consumer lending, and more.

In TFM's Alternative Business Finance Index, I am interested in what solutions out there are enabling assets to be created from trade credit and to be distributed to others, whether they are banks or non banks.  As we know, trade credit is financing offered by sellers to their customers (usually in the form of 30­ to 90 day payment terms).  It is a sizable market, globally estimated to have $8 to $10 trillion (yes, trillion!) outstanding at any one time.  As we have pointed out in the past, most of this trade credit stays on the balance sheet of the companies.  As various alternative business finance techniques develop, understanding where and how solution providers create and transfer assets is critical.

As I thought about the criteria I would use to determine who should be on this list, it came down to one simple objective data point – what assets do they either directly or indirectly generate for funders, be they banks, asset based lenders, the Shadow Banks, Institutional Investors, asset managers, etc.

The challenge in trying to get that data point is that few of the B2B vendors are public.  The few that are public, including Tungsten, Basware, OnDeck, and Lending Club, live in a different world of transparency.  See Will Markets Cool Alternative Lenders 

Tomorrow we will look at some criteria we can use to examine this space and determine who should be on the Watch List.

Visit here to sign up for a free listing.  If you think you should be included on our upcoming Watch List, Contact me at dgustin at tradefinancingmatters.com and we can chat exchange some thoughts.

 

First Voice

  1. tim:

    very well written and informative article would like to find out more about this topic.

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