For many, it’s easier said than done. Traditionally, banks have existed to help growing companies, but more and more entrepreneurs are finding that their growth is reaching a standstill rather than accelerating. Waiting up to 120 days for funds means that workers go unpaid, inventory postponed and clients turned away. Meanwhile, banks view loans under $500,000 unprofitable – yet surveys indicate that small businesses need loans of $250,000 to $500,000 the most.
That’s where FundThrough, a Canadian marketplace lender, comes in. By using in-house technologies to provide immediate estimates, they are reshaping an alternative method of financing.
“The traditional way of getting funding is you would get dressed up in a nice suit and tie or a dress and go out to your mainstream bank, sit down with your branch manager, and the branch manager would give you an application form,” Co-Founder & CEO Steven Uster told IT in Canada.
It’s a tired method, one that no longer needs a place in the development of SMEs. A study from Harvard University revealed that it takes over 25 man hours to gather data and provide banks with the information they need and, says Uster, it all has to be done during business hours.
“Coincidentally,” he says. “That’s when you’re actually running your business.”
Clearly, the model isn’t working. It’s in this lapse that Uster saw the potential for a revolution in the financial technologies cluster.
“We built technology to be able to link into various data sources, like your accounting software, your bank account, your CRA statements and your supplier or vendor portal,” he explains. “We can get a whole slew of data that allows you to go through our application process within minutes and get an immediate estimate of what we can lend to you. Within 24 hours you get a final estimate and you’re able to get funded onto the platform immediately.”
This seamless exchange is made possible through complex algorithms. With real-time data and analytics, FundThrough is able to assess risk and match lenders with borrowers in a fraction of the time. All of this means entrepreneurs can spend their time actually growing their business.
“We find that many of our applications are filled in after hours or on the weekend, which is not surprising considering entrepreneurs are busy running their business during the day,” Uster notes. “The other thing is speed and flexibility. The ability to go and get funding with one click on your iPhone as you’re driving from client to client, without having to think about your financing, is a step function improvement in how businesses get financed.”
Uster is quick to note that it doesn’t mean the end of banking, merely a change in financial relationships.
“You’ll always need your bank to deposit and hold onto your money,” says Uster. “We work in collaboration with that.”
IT in Canada managed to snag an interview with Kareem Bikhit, co-owner of Toronto-based IT firm Iris Software Solutions, to discuss his experience with FundThrough and the Canadian marketplace.
IT in Canada: Could you tell us a little about Iris Solutions and your role within the company?
Kareem Bikhit: I started Iris Software Solutions just under a year ago, as a spin off from a sister company I co-founded in 2008. With the original company we launched a SaaS based product; electronic signature that is legally binding in Canada and our customers include two of the three telecoms and two of the five banks. Through our relationships with these clients we had a growing demand for specialized IT services, which is what I spun off as a separate entity. We do specialized IT, either insourcing or outsourcing, with two areas of focus on fintech in the capital markets area and customer facing tech in the telecom area.
Where we’ve really expanded in the past few quarters is in capital markets IT consulting – if there’s any over-the-counter trading product that needs an electronic platform for the entire trade life cycle, from deal-booking to settlement and all the steps in between – that’s where we come in.
Typically, there are only a handful of platforms that every bank is running on. These platforms are highly customizable and highly configurable. We then come in, run with the integration, the implementation, in addition to automating as much as possible so that they can reduce manual processing.
ITIC: When did you realize you needed an alternative method of financing?
KB: When you launch an IT company or any company in general, you always have to see if you need external funding. Unfortunately in Canada, the environment is not too friendly to IT companies that need finance backing. There’s still a big mentality here where, if it’s not a brick and mortar enterprise then it’s too risky. Traditional banks will never touch an IT company that wants to expand fast. Furthermore, VC’s do not typically put capital into services firms.
In my case, I knew I needed funding in order to grow fast, sales & marketing, negotiate to become a tier one vendor, and most importantly securing the best talent. The latter is becoming harder in a market like Toronto where the tech sector is on fire. Higher rates and better payment terms gives us the competitive advantage to keep our superstars.
With banks and telecoms, their payment terms aren’t always that favorable. It could be 30, 60, 90 days – you could be waiting two to three months. When I’m looking to double my book of business every couple of months, every day presents an opportunity cost.
That’s when we turned to FundThrough.
ITIC: What advice would you give to other Canadian tech startups looking to get their footing?
KB: Things happen so fast at the beginning and you’re so focused on your core business, as you should, however take a moment to put together a realistically attainable business plan and realistic cash flow projections so you get a view of what type of funding you need.
Manage your cash flow to the dollar, always remember why you’re doing what you’re doing and you’ll grow your way to success. Never think small.
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