FinTechs Provide Solutions to Small Exporters Struggling to Access Finance

Small exporters struggle to get access to finance. Large international banks are not interested in bearing the cost of onboarding small and midsize businesses, and small banks that do know these smaller businesses do not understand international trade.

Nelson Holzner, co-founder and CEO at MODIFI, says that has created opportunities for his company and others to help buyers and sellers finance and manage their trades.

“That leaves us in a very nice space where the big guys don’t have the incentive and the smaller guys don’t have the knowledge to do the international piece of the business,” Holzner told PYMNTS. “This is where FinTechs like us are really helping the customer to bridge that gap.”

Building a ‘Cockpit of International Trade’

MODIFI has expanded its geographical reach quickly. When it was founded in 2018, the Dutch company was focused on facilitating trade between Europe and Asia — then moving to the U.S. market later. It has executed that much faster than expected, Holzner said.

On Jan. 4, the company announced a new partnership agreement with Tradeling, an eMarketplace focused on B2B business-to-business transactions in the Middle East and North Africa.

See more: Tradeling, MODIFI Partner on Trade Financing

On the product side, its starting point was tackling the financing gap, especially for small and midsize businesses in international trade. That remains the core of MODIFI, but the company also plans to provide additional services, helping customers with payments, documentation, and shipments tracking.

“All these tiny little things, which seems trivial, are very important for the small guys, so we want to be really like a suite of services where they basically have a bit like a cockpit of international trade,” Holzner said.

Helping Smaller Exporters Navigate the Supply Chain Crisis

As bottlenecks continue to disrupt supply chains worldwide, small exporters have become increasingly become concerned about whether they’ll get paid at all. MODIFI offers solutions, and Holzner gave the example of the services it would provide an Indian company exporting to the U.S.

“Once we step in between all that and we provide liquidity to the exporter in India, we basically also shift the risk to us,” Holzner said. “That was a big theme for many of the exporters who know their customers, but sometimes don’t know their customers that well.”

In the current environment, shipments also take longer, and that means the exporter needs more time to get paid in cases where the buyer pays only when the goods have been delivered. This creates problems for the smaller exporters that still must pay their staff and take on new orders.

“This is where providing liquidity to those guys upfront is really helping them a lot to navigate this crisis,” Holzner said.

Cooperating With Other Platforms and Services

For MODIFI, the supply chain challenges have been both good and bad for business. On the one hand, volatility and uncertainty create demand for the financing and security it can provide. On the other hand, there are deals that are simply not executed because buyers and sellers cannot come to terms on issues like freight costs.

“Getting to a normal level of supply chain efficiency, I think that will be the one big step for trade,” Holzner said.

Holzner said he expects to see multiple interrelated platforms tackling different parts of the value chains — for connecting buyers and sellers, for logistics, and for payments and finance.

See also: FinTech Startup MODIFI Brings in $24M in Series B Funding

“For example, we operate with quite a number of logistics platforms and also eCommerce platforms where they are very good at connecting the buyer and sellers and inventory management — all that kind of stuff — but they are not really good at managing risk and providing finance,” Holzner said.

The new partnership with Tradeling provided a good example of this, he said. Together, they can help the smaller exporters meet these challenges.

“The small guys should be able to trade like the big guys, but they can’t at the moment,” Holzner said. “So, they do need these platforms and services, and I think this is what it’s all about.”