This online marketplace lets small businesses turn invoices into cash

Magellan Fetalino, co-founder and CEO of Acudeen Technologies

This article is part of Tech in Asia’s partnership with The Jay Kim Show where we publish the revised transcripts from the show’s podcast interviews with top entrepreneurs. This is heavily revised from the original show transcripts. For the full interview, go here.

Magellan Fetalino is the CEO and co-founder of Acudeen Technologies, an online peer-to-peer marketplace where SMEs can sell their receivables from multinationals and blue-chip companies to a network of funders.

Fetalino shares how the platform works.

What led you to become an entrepreneur?

I grew up in the Philippines, and I took entrepreneurship when I was in college and graduate school. I was exposed to the business world as a teenager, and I was always struck by the idea of having my own business someday. Even before I graduated, I told my parents, “I want to be part of our family business.” So, that became my first business training, and it’s where I realized how big of a problem receivables are for small businesses. That became the precursor to what Acudeen is today.

How does receivables financing work and affect a business’ cash flow?

Receivables financing is an alternative way to get financing using invoices or other forms of receivables (like purchase orders), which are essentially assets but not liquid. Normally, these are due in 90 or 120 days.

The thing about SMEs is it’s hard to get financing from traditional means. If you are a two-year-old company and you go to a bank, it’s almost impossible to get a decent loan, especially if you’re in an emerging market like the Philippines. More so, a lot of banks would require collateral from you—a hard one like real estate—and if you’re starting a business, you wouldn’t normally have any valuable assets to collateralize.

If you look deeply into the balance sheets of small businesses, about 35 percent are unutilized receivables, and this is true for any businesses in Southeast Asia. If only these SMEs can use these receivables as a tool to get financing, it would really create a very inclusive environment for small businesses.

Could you give us an example of how Acudeen plays its role?

Our family business, for instance, used to supply pills to big, multinational pharmaceutical companies. Typically, these companies will impose a payment term of up to 150 days. If you’re a small business, you have no power to negotiate such terms. You just have to agree with it, especially if you want to keep your business. However, it creates a massive cash flow gap.

Our platform allows these small businesses to connect with funders (i.e. financing companies and banks). We make it easy for them to sell their invoices and receivables. We do the due diligence for banks and facilitate the transactions.

Could you walk us through the user experience?

As a new user, you have to go to the website and register. Then, we do a know-your-customer process wherein we ask for your business documents and identification. It would normally take us a day to authenticate the documents.

We have existing relationships with a lot of large companies in the Philippines, and a number of these businesses are integrated through their ERP systems. This makes it possible for us to verify and validate invoices quickly. For those without ERP integration, we can verify through an SME’s relationship with the companies.

Once your account is approved, you can already start uploading receivables and contracts that you wish to sell on the platform. After uploading, you’ll immediately receive some costs, as we charge a discount for these receivables.

So, if you upload a US$100 invoice, you will be given an option to sell it at, say, US$95. If you agree with the rate, the funders will start to bid on it. We normally run auctions for invoices and impose a time limit of 9 hours. Aside from that, we allocate a floor price for the discount.

What is your revenue model?

What if an SME’s client is delinquent? How do you deal with the risk?

Do you have any expansion plans?

You recently went through the Alibaba eFounders Fellowship. What are the key takeaways you’d like to share?