TradeRocket Looks For Liftoff With Hitachi

All firms need working capital, but for some firms, working capital is hard to find. There can be wide gaps in the time it takes to pay expenses and then collect on business performed, which is where a cash cushion comes in handy.

FinTech is increasingly streamlining the process of bringing funding to small and midsized firms, an area that traditional lenders have been lax to embrace and where smaller, technology-focused firms have been gaining ground. One such upstart is TradeRocket, headed by CEO Jim Eckstein. The firm recently announced a pact with Hitachi Capital where the latter will commit funding for supply chain financing.

In an interview with PYMNTS, Eckstein said the relationship with Hitachi goes back a few years, but the latest focus — which began after discussions commenced last December between the two companies — is on middle-market companies with sales of between $25 million and $500 million. The Japanese conglomerate will commit $100 million in capital to be deployed across TradeRocket’s platform.

In essence, TradeRocket will be bringing prospects to Hitachi Capital, with the ability to gauge through what Eckstein termed “preliminary underwriting” as TradeRocket is privy to the criteria Hitachi uses to lend. That symbiosis helps speed capital deployment, the executive said. One of the ultimate aims of the agreement is not just to provide working capital but also to facilitate early payment activity up and down supply chains.

TradeRocket is able to present Hitachi with data-driven information on middle-market firms that might not otherwise come Hitachi’s way, in real time, as TradeRocket syncs with companies’ ERP systems. “We see everything,” Eckstein explained, “from invoices, tracking payments and cash flow” and not just through static snapshots.

Hitachi’s focus on working capital deployment will run the gamut of industries but might often be centered on industries with which the conglomerate is familiar, ranging from equipment leasing to manufacturing to logistics, said Eckstein. TradeRocket itself tends also to find interest in supply chain management with companies in the construction, municipality and medical practice industries, which all tend to have one thing in common: supply chains that are marked by dozens and, in some cases, hundreds of suppliers. TradeRocket’s targeted market, said the CEO, focuses on 18,000 buyers in the U.S. and the $5 trillion in spend that is spread out across 18 million suppliers. But, said Eckstein, studies have shown that many mid-market firms (as many as 66 percent of those surveyed less than two years ago by The Wall Street Journal) say financing is hard to come by.

TradeRocket looks to move clients to eInvoicing, and Eckstein noted that this helps reduce costs, even as time to payment gathers speed. As buyers move toward electronic formats, the costs of processing an invoice move from anywhere between $13 and $18 for paper processing to as little as $2 or less for eInvoicing — all invoices are matched to purchase orders and receipts.

Under the terms of the agreement, the buyers can obtain up to $5 million in order to support the supply chain, and for Hitachi, as the funder, with the data mentioned above at hand, risk has been reduced. The supplier also gains visibility into the cash cycle, said Eckstein. TradeRocket enables suppliers to see the status of invoices once they have been submitted, which improves their own cash flow visibility. The ability for suppliers to choose early pay options (which, as Eckstein noted, can come with a click of a button) allows for transparent terms on discounts as well. In reference to cross-border payments, Eckstein said that suppliers maintain relationships with banks in the U.S., and so transactions are settled in dollars.

The move to mobile is also an eventuality, as Eckstein stated that more business, up and down the supply chain, is getting done “in the field,” and though Java-based functionality means that TradeRocket can be used on mobile devices, dedicated apps are in development and should be available by the end of this year.