Peer-to-peer invoice finance marketplace Grapple to take on big players

- By Collaborative Media & Publishing
The founder of Australia’s first online marketplace for facility invoice financing Grapple says the company can scale up quickly and take on major industry players.

Grapple offers businesses a line of credit against their outstanding invoices, which are fractionalised and parcelled off to investors.

In peer-to-peer lending, a borrower seeks funds from an investor rather than a bank. In Australia, lending to the sector is confined to high net worth individuals and sophisticated investors.

Grapple, the first of its kind marketplace invoice financier in Australia, has two key offerings, says founder and chief executive Stephen Dawson.

The first is it allows businesses to upload a single invoice onto the platform and have a range of investors each fund part of the invoice instantly through an algorithm that instantly bids on behalf of investors. 

Single invoice financing hasn’t been done like this before, but Dawson says the second offering is the real game changer.

The company provides businesses with a pre-approved line of credit against their outstanding invoices through a connection to their accounting system, including Xero, MYOB and Sage.

“When they ask for money, say they've got a million dollars available and they go, ‘I want two-hundred grand today,’ our system will go and pick out $200,000 worth of invoices and then we're going to go sell them individually, fractionalize them and distribute them out to all the investors on the platform,” Dawson says.

“We’ll close it all in the same day, move the money across and give it to the person that effectively has their line of credit.”
Creating a new asset class
Grapple can pay the money on the day the business needs it, because it knows its investors’ individual risk appetites and the sorts of businesses they want to lend to. In effect, it has pre-approved “bids” for the invoices, which is a key difference from traditional peer-to-peer lending platforms. This is performed through smart algorithms which bid on behalf of the investors and their preselected risk appetite.

“We've just gone to that next level with the marketplace to be able to offer that same day funding and not have to wait for the investors, but still get all the benefits of a marketplace,” Dawson says.

For borrowers, the benefits include potentially better loan rates and not having to pay the ongoing fees that traditionally come with line of credit facilities.

Investors nominate their risk appetite and earn returns of 6% to 10%.

“Investors can fund an investment that hasn't been available before, which is the direct ownership of individual invoices within a line of credit facility,” he says.

“I think we'll see a lot of different funds, even super funds, looking to really take a piece of this asset class that's now available to invest in.”

Dawson came up with the idea while working for Deloitte in London in 2015 and 2016 while analysing the peer-to-peer lending sector.

“I looked at the Australian market when I was over there and noticed we didn’t really have a mature industry for invoice financing and it was growing significantly. There was no one doing it the way we are now,” he says.
Partnership with Clearmatch
As a peer-to-peer lender, Grapple isn’t reliant on bank funding for its financing to businesses and so its growth isn’t constrained by the debt covenants that many of its competitors are under. As a result, says Dawson, they will quickly be able to compete with major players for large accounts.

“The facility market is absolutely massive,” says Dawson.

The debtor finance market in Australia has grown significantly over the last two decades with industry turnover increasing from $3.9 billion in 1996 to over $62 billion in 2016, according to the Australian Journal of Applied Finance published by Finsia.

The labour hire sector as well as manufacturers and distributors all use invoice financing and Dawson says professional services firms are also increasingly using the funding option.

Grapple, which started offering lines of credit late last year, doesn’t release financial data, but Dawson said it provided finance against 4,200 invoices in the December quarter.

“We’re on a big growth path, so we just want to get the word out there a bit, sign up all our customers, get the marketplace going and get investors happy, get the returns flowing through,” he said.

Grapple works in partnership with Clearmatch, the investor lender behind personal loan peer-to-peer lender SocietyOne. Grapple is the originator of the invoice loans while Clearmatch, now a stand-alone company, acts as the fund manager by finding investors.

Grapple has raised about $2 million from investors including former Macquarie Bank boss Bill Moss and Washington H. Soul Pattinson director Robert Millner and will seek more funding later this year.

This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY. Published by BPAY Pty Ltd.  BPAY is offered by over 150 Financial Institutions. Contact your Financial Institution to see if it offers BPAY and to get the terms and conditions. This is general advice – before using BPAY please review the terms and conditions and consider whether BPAY is appropriate for your personal circumstances.

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