Revenue financing captures the eyes of investors

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From government announcements to high-profile funding rounds, April proved to be another busy month for the UK’s FinTech industry.

We kicked things off with UK FinTech Week. Now in its sixth year, the week-long event brings together key influencers and decision-makers across the financial services, technology and public sectors to reflect on the industry’s achievements and discuss unfolding trends.

Sustainable finance models, cryptocurrencies and data featured heavily – a reflection of where industry leaders believe the FinTech sector is heading. There were also promising announcements from the FCA. Recognising the need for the UK to retain its global FinTech crown, the regulator pledged to lead from the front by introducing policies conducive to innovation and growth.

Importantly, policy pledges have already converted to action, at least for the time being.

Following UK FinTech Week, Chancellor Rishi Sunak announced three new policies – a reform of the visa system to help firms attract overseas talent, the creation of a regulatory ‘scale box’ to support high-growth FinTech companies, and commitment to deliver an industry-led center for finance, innovation and technology.

Such bold policy pledges demonstrate the weight being placed on FinTech as a pillar for employment, productivity, innovation and growth. Should momentum be maintained, we are likely to see a second wave of government pledges in the not-too-distant future.

Alternative finance is by no means a new trend. In the aftermath of the global financial crisis, scaling businesses levitated towards non-traditional funding sources.

Now, let’s move onto the standout funding rounds for the month.

It’s not uncommon for April to be a slower month on the business side of things, with religious celebrations and various holiday periods spread throughout. Nonetheless, April hosted another round of impressive fundraising closings.

Of these, there is one sector that is clearly attracting the interests of investors – revenue financing.

Much like the alternative avenues of funding that currently exist for SMEs, revenue financing offers an innovative way for businesses to receive loans outside of traditional credit structures. Unlike funding models linked to debt crowdfunding or private equity, revenue finance is paid back as a percentage of the total revenue generated each month.

FinTechs in the UK are taking advantage of this model, leveraging technology, and forming partnerships to ensure SMEs have access to fast finance.

The UK’s largest revenue based FinTech lender, Outfund (main picture), closed a £115 million Series A round of equity and debt investment. With operations in Spain, US and UK, Outfund can deploy between £10,000 and £10 million of funding for e-commerce firms that meet its minimum monthly revenue turnover requirements.

Spanish-based RITMO, which recently partnered with WorldFirst to give UK companies up to £3 million in growth funding, also closed a £200 million debt funding round – the largest of its kind for any company in Europe.

Digital financing platform Stenn raised £38 million in equity funding at a £700 million valuation. The London firm offers efficient growth capital for global SMEs engaged in international trade. Since being founded in 2015, it has deployed more than $6 billion of financing to SMEs in over 70 countries.

Revenue financing looks to be a high-growth sector, with more funding rounds on the horizon. It reflects a broader point on FinTech’s competitive advantage over traditional financial institutions. When consumers, businesses or investors encounter challenges or seek opportunities, FinTech startups are ready and willing to heed the call with innovative offerings.



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