Fleximize, a company set up by finance professionals and British entrepreneurs, will provide credit to UK SMEs through a revenue-based financial model. Monthly repayments will be based on the company’s revenue for that month, rather than being a fixed-term monthly repayment.
Max Chmyshuk, Founder and Managing Partner at Fleximize, said: “Revenue-based financing (RBF) is often viewed as “the best of both worlds” sitting between debt and equity investment. The value of monthly repayments fluctuates with the performance of the client’s business so they pay more in good months and less in bad ones. This can be attractive for many SMEs in the current uncertain economic environment.”
The company intends to use a more in-depth analysis to evaluate applications, allowing more flexibility than “the strict criteria applied by banks.” When reviewing, it will take a company’s financial performance into account, as well as customer feedback on online trading platforms.
The revenue based financial model, sometimes referred to as non-dilutive financing or royalty based financing, means that companies can receive a loan from Fleximize in exchange for a fixed percentage of gross-revenues (typically 10-20 per cent) until a certain total amount is paid back. Fleximize estimates this total to be between 1.10 - 1.30 of the initial amount advanced to the business.
Max Chmyshuk said: “We feel that our revenue-based financing solution is significantly less risky for a business than other forms of more mainstream financing usually involving fixed regular repayments. There is a natural alignment of interests between us and our clients compared to a traditional loan: any payment to us means that the clients are successfully selling their products or services.”
Fleximize hopes that it will serve “small, underbanked businesses, including those operating in the e-commerce space.”
According to research conducted by Fleximize, around £1.2 billion of business loan and overdraft applications from UK SMEs were rejected in the third quarter of 2013.
Max said: “SMEs are the lifeblood of our economy and it is essential that they have access to credit to help them grow and employ more people. We believe that with many banks still being reluctant to lend, an improving economy and a growing number of strong and viable SMEs, now is a great time to launch our proposition. Indeed, our research shows that 59 per cent of SMEs would immediately consider a proposition like ours, and wish to discuss it further. ”
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