3 minute read
YouLend: Cashflow is king
Cashflow is king
Revenue-based finance solution to keep cashflow flowing
Max Shave Partnership Manager YouLend
More people than ever are starting a business and the shift towards e-commerce has also accelerated in the last two years. But it’s not without obstacles. The start-up boom has been challenged by cashflow issues, as SMEs struggle to cope with swings in consumer behaviour skewed by COVID-19, supply chain issues, and inflation.
Now, as we completely move away from coronavirus-related restrictions, SMEs will not only continue to rely on innovations that saw them through the pandemic, such as contactless payments and embedded finance, but they will also be drawn to crucial alternative sources of finance to support cashflow.
Flexibility is important for SMEs
At YouLend, we provide a flexible revenue-based financing solution which allows business owners to repay as they earn. It’s a simple and transparent solution for SMEs that they can easily understand and manage. This flexibility allows them to get the most out of their financing with limited effort. That’s why we developed an automatic system where repayments are subtracted as a percentage from earnings automatically, and what ends up in the business owner’s bank account is entirely theirs and available to use.
Historically, SMEs have struggled to access finance for reasons such as limited cashflow, poor credit ratings and unfair repayment terms. Following the 2008 financial crisis, high street banks needed to lower their risk levels and shore up their capital. They did this by blocking-off some of their lending pipelines. Consequently, many banks could not invest in effective processes to accurately assess small business risk and therefore conduct lending activities.
By relying exclusively on credit reports and traditional risk modelling techniques, many financing providers ignore some of the best risk predictors in an increasingly digital world. YouLend uses alternative data sources to generate deeper insights into the behaviour of our applicants, including revenue changes, social media presence and the volatility of customers’ perception of the business.
Ultimately, we believe all companies should be looked at objectivity and therefore data plays a large role in our ability to give each business owner maximum funding.
Our credit risk modelling does not simply assess the probability of a business owner not repaying. Instead, we calculate the underlying risk of the business losing customers that drive their revenue. Our approach to data is rooted in sourcing a large range of non-correlated, quantitative inputs. In contrast, traditional lenders typically use two inputs: revenue and operating history. Our highly reliable credit risk system means we can provide funding options to new or asset-light businesses – traditionally an excluded section of the market, as well as allowing us to approve more businesses, faster.
Quick response
Against the current market back drop, speed must play a big part in access to finance. The ongoing supply chain crisis and increasing inflation mean that small businesses need support in days rather than weeks or months. At YouLend, businesses get an offer within 24 hours. We remove the hurdle of long processes and give SMEs a chance to focus on what really matters, their business. The quick access to funding and automated repayment mechanism allows SMEs to respond to bills, orders, marketing, or expansion opportunities quickly, often as quick as that very same day.
Lending through lockdown
Our completely flexible and scalable platform meant that when COVID-19 hit, all our employees working from home were able to immediately pick up where they left off in the office, and so able to continue providing rapid access to funding throughout the multiple and varied lockdown measures. YouLend’s algorithms were able to successfully navigate complex and ever-changing lockdowns in 2020 and continue funding when traditional lenders stopped.
Looking forward, surging energy prices and supply chain delays are still causing significant issues for businesses struggling with the aftermath of COVID-19. Combined with the looming rise of interest rates and worries about stagflation, the current climate feels like the ideal petri dish to grow a cashflow disease. SMEs are going to be looking for access to flexible, alternative lending solutions to see them through the turbulent future. Revenue-based financing can help SMEs sidestep cashflow challenges, ultimately plugging the cashflow gaps that are opening up through late payments.
