With over 20 years of experience as an entrepreneur, Cosmin Curticapean – Founder & CEO of iFactor, is the creator of 12 businesses. Varying from production and distribution, all the way to software and services, his latest endeavor is iFactor – an alternative SME lending platform.
During the years, one of the pressing problems he kept encountering was the access to finance for his business.
“It takes a lot of effort to extend a bank loan, which in turn becomes a burden for small businesses that are trying to hire new people in order to scale and grow. The 2008 financial crisis made the problem even worse, causing a large number of SMEs to file for bankruptcy in the period between 2009 and 2012. The difficulty to get financed by the banks has generated a lot of frustration, not only for me, but for many other business owners.” recounters Cosmin. “It was then when I realized that this is a big issue worth solving. We really need to focus on creating more jobs, or the world is going to face more crises.”
We got to delve deeper into the matter in an extensive interview with Cosmin.
How would you define the problem you’re addressing, and what is your solution for it?
Some of the reasons that make the lack of financing one of the main stoppers for small businesses growth are:
- Low access to working capital;
- Not being able to provide collateral assets to support bank loans;
- SMEs are low ticket size for banks, combined with high processing costs for loan applications;
- SMEs have a very hard experience with the banks during loan applications.
On the other hand, banks face unreliable scoring data for the risk analysis of the SMEs loan applications, which results in a huge gap being traced between Banks and SMEs.
The Traditional Institutional players/Banks have to cope with growing competition and difficulty to differentiate, on the one hand, and making less and less money on their SME lending business, on the other.
Some of the main reasons for these problems are:
- Banks are one of the slowest industries to innovate;
- They are heavily regulated institutions, as they work with the deponents’ money;
- In the current market, debtors, especially large sized corporations, have strong negotiating power to stretch payment terms;
- On the other side of the equation, SMEs have little bargaining power and, as a consequence, face liquidity problems. At the same time, SMEs face big difficulty in finding liquidity as they are small and expensive tickets to banks.
Common solutions to the liquidity problems resulting from stretched payment terms can be traditional bank working capital finance or factoring. Unfortunately, SMEs nowadays have limited to zero access to these financing sources, the reason for this is that banks and factoring companies incur high processing costs. This results from performing a full financial analysis of both the SME and its off-taker portfolio.
Banks are only on the third place in the main source of the SMEs financing. Studies (MIT, 2017) stress even more about the worldwide financing problem of SMEs:
- 95% off the SME have insufficient access to funding
- over 245 SMEs are underbanked
- there is over 2 trillion £ funding gap for SMEs
To solve all the above, we’ve built iFactor: a B2B Marketplace platform that brings together SMEs that need liquidity and investors with the intention to provide liquidity to the SMEs through buying their outstanding invoices.
iFactor becomes a digital broker for alternative SME lending, helping:
- SMEs gain access to working capital in less than 24 hours, offering:
-
- Transparent pricing;
- Cash delivery in 24hrs;
- No collateral, no lock-in;
- Easy, online access;
and
- Banks or Investors trade a new asset class:
-
- Short-term;
- Low risk;
- High yield;
- Low underwriting cost.
iFactor offers a fast, simple and flexible working capital solution. Our flexibility comes from the fact that we focus on the quality of the single invoice and related payment risk. Through digitizing the factoring process, introducing the auction method, and applying digital scoring techniques we are able to revolutionize the traditional factoring product. iFactor uses cutting edge technology ( AI/ML, DLT/Blockchain, Smart Contracts) in order to automate and open the underbanked / under-serviced SME space.
To the bank, iFactor offers a new product, at a low investment costs and high return. iFactor is a Customer centric platform – fully functional and tested. Architecture includes: assessment of financing cost, end-to-end client on-boarding, KYC and risk scoring in agreement with Banks, investors and regulatory requirements. Built around financial and fraudulent risk algorithms that identify Sellers activity significantly earlier than current manual processes. Scalable, designed to grow, multilingual.
The cooperation with the banks and other established regulated players, provides iFactor fast scalability, with access to a large database of SMEs while enabling a guaranteed offer side to the sellers. With the bank willing to finance a certain quality (risk profile) of invoices, the cooperation offers an immediate result on the auction and consequently immediate cash to the seller whilst the bank gains access to a digital tool, reducing costs and time in their way to service SMEs. Next to the bank, iFactor allows NBFIs, private investors and high net worth individuals to act as buyers on the platform.
And our mission doesn’t stop here.
How did you start?
In 2011, after the huge financial difficulties generated by the financial crisis, the expression “Banks are giving you the umbrella when it’s sunny and they take it when it rains” became true for my companies also. I started to study the alternative lending solutions such as crowdfunding platforms in the USA and went to a friend who at that time was CRO of the Royal Bank of Scotland in Romania with an experience of over 30 years in banking. I asked for his advice on how we could build a lending solution that would compete banks by using technology. One year later he told me that Factoring could be a good solution. Then I started to study Domestic and International Factoring at Factor Chain International Amsterdam.
Later on, I met Manuel Costescu and he became a partner in the company bringing vast expertise in the financial industry world from his JP Morgan and McKinsey background. When it became clear that we were building a Fintech company, I started the Oxford Fintech program and CFTE AI in finance program.
What was the biggest challenge you’ve been dealing with since starting a company?
The biggest challenge was to find the team that would have corporate expertise in finance but an entrepreneurial approach in working in a start-up. This challenge was extended towards partnering with the banks as they are some of the most unreformed legacy systems.
Why did you choose to join the KPMG Startup Grow Pad acceleration program?
iFactor’s stage of development requires acceleration in fields like: Regulations, Legal documentation and Fundraise. KPMG has huge expertise in all these domains plus an extensive network from which iFactor could benefit. Comparing to other big corporations, the KPMG team showed an “exotic” approach towards startups and the pain points they have on their way to scaling. Instead of tracking specific KPIs and engagement metrics, like most people working in big corporations do, the KPMG team was always available to answer any questions we had, even during weekends.
* iFactor was one of the startups accepted into the 1st edition of KPMG Startup Grow Pad program, alongside Nifty Learning, Jobful, Box2M and SYTapp.
How being a part of this program helped you move on with your project?
Being part of KPMG Startup Grow Pad was a great opportunity for iFactor. With the KPMG and Spherik team we’ve managed to distill, in a professional way, our pitch towards both investors and key-partners, we have concluded the best ways of incorporation, fundraise strategy and have started developing new SME lending products; we have also refined the platform’s legal documentation and probably most important, we have produced the best whitepaper confirmed by NBR through which private investors can help SMEs get financed on the iFactor Platform.
What’s next?
With the newly acquired knowledge and having passed regulatory issues we continue to develop iFactor. We closed a partnership with Banca Transilvania as a buyer in the platform and some new banks are about to come on board soon. We also started onboarding private investors as buyers and are more than excited about this. We are accelerating growth in Romania at a high pace and we are fundraising for scaling in UK and DACH region.
***
The core team of the startup is made from:
Cosmin Curticapean: Founder & CEO, Serial entrepreneur with 20 years experience in emerging markets and various industries (IT, telecom, energy und health) and multiple exits. Founded and grew various companies to 150+ employees and million dollar sales.
Manuel Costescu: Cofounder & CFO. With 15 years of financial, strategy, and investment experience as Director at JPMorgan, consultant at McKinsey, and Secretary of State for Investment in the Romanian Government; he has an MBA from MIT, in 2005; and an MPAID from the Harvard Kennedy School, in 2005.
Mihai Grosu: CTO, has 10 years experience in project management, implementation and operation of high tech platforms and vertical applications in different industries.
Sebastian Presecan, CPO. Head of Programming, Experienced Cloud & Mobile Architect, Experienced Java Architect, Experienced Project Manager and SCRUM Master, Client Management, Bid Management, Team Management, Leading Teams. Active researcher on pervasive computing and m2m fields. Specialities: Project Management, Mobile Development (IOS, Android, BB), Cloud Computing, Pervasive Computing, M2M.
Alin Badilita: Growth Manager, startup consultant, fintech promoter
Miruna Pochea, Research Advisor iFactor Advanced KYC& iFactor Pure Analytics.
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