Start-ups accelerate the supply chain finance while banks still calculate
Success in global commodity trade and FMCG requires quick decisions. The speed of procurement, production, distribution and sales determines the quantities and conditions. And these account for the success. But to make quick decisions, you need trading experience and financial freedom.
Unfortunately, for years stricter government regulations – in Europe via the Basel 3 agreement and tougher compliance rules in the US – have been limiting the decision-making freedom of banks in the international lending business. The result: The compliance departments of the banks are growing, and the downtime for checking commercial loans is increasing. In addition, banks often find short-term loans of 30 to 90 days less attractive and labor-intensive in light of a historically low credit environment. That makes sense, because sometimes the bank lending decision process takes as long as the loan repayment term. The result: Banks are increasingly focusing on large volumes and safe addresses. In other words, bigger companies have clear economies of scale in their trade finance – one that spares banks audit work. According to Exportmanager*, in recent years, about 50% of SME financing requests have been rejected by banks. For large corporations, however, only about 20% were turned down. SMEs especially need agile financing partners, because one of their advantages over bigger players is their greater flexibility.
For exactly these reasons, more and more start-ups and private financing partners are closing the gap left by banks. The problem: These providers often lack the experience, financial resources and international presence to simultaneously meet the loan requests of multiple SMEs with their trading partners around the world. As one of the few exceptions, Stenn has been able to establish itself in this challenging financial environment in recent years. For one thing, Stenn’s founder, Greg Karpovsky, has more than 20 years of experience in international trade finance, and on the other hand, his leadership around President Kerstin C. Braun and Celine Hartmanshenn, Colin Lynch, Chris Rigby and Andrey Polevoy adds enormous expertise in financing and hedging international trading.
Emerging firms like Stenn are filling what the Asian Development Bank (ADB) estimates is around a $1.5 trillion gap in trade funding (in 2016), focusing on SMEs as well as Asian and South America markets. Their 2017 report predicts that by stepping in and providing much-needed liquidity – aided by Fintech – global trade could grow over 50% to $25 trillion by 2026 ($16 tn in 2016), with up to $1 trillion coming from non-bank trade financiers. Due to the high opportunity costs (relative to reward size), traditional banks are unwillingly ceding larger chunks of future trade-related fees to non-banks who can quickly approve lower value ticket deals by taking advantages of the latest fintech innovations banks have been slow – or reluctant – to adapt, including agile customer on-boarding, automation ‘e-KYC‘ (know-your-customer) and the latest in blockchain technology (e.g., OCR – optical character recognition). SME’s benefit from the easier credit and payment terms, created efficiencies and paperwork shortcuts, while the trade financiers are able to manage credit exposure and document transactions faster with greater accuracy and less overhead. This is how trade finance solutions are developed from Pakistan to Paris, Mumbai to Munich and Guangzhou to New York.
From an investor perspective, this makes the attractiveness of this rapid growth so great that even European banking organizations have now recognized the advantages of Stenn – and are investing in Stenn. So in the end there are three winners: the international manufacturers and buyers who gain agility and liquidity, the investors who benefit from the enormous financial needs of global trade, and Stenn, the largest, small, young, experienced startup in London’s Fintech scene.
* See interview with Henry Balani in Exportmanager, 3/2018
Stenn International Ltd. is a UK-based, non-bank trade finance provider specialising in cross-border trade. Stenn’s trade finance solutions are comprehensive and can be combined to cover the entire supply chain from purchase order to delivery of goods. Innovative practices allow Stenn to finance in sectors and geographic regions currently underserved in global trade. The company operates globally with offices in Buenos Aires, Los Angeles, Dallas, New York, Miami, London, Amsterdam, Dusseldorf, Berlin, Mumbai, Chennai, Singapore, Hong Kong, Guangzhou, Hangzhou, Suzhou, Shanghai and Qingdao. Learn more at https://stenn.com or follow us on Twitter, LinkedIn and Facebook.