This Philippine Start-up Wants to Solve Your Cash Flow Problems
Acudeen plans to capitalize on the $5 billion-credit gap among SMEs
PHOTO CREDIT: Getty Images
Philippine start-up Acudeen was born out of a family business. The start-up’s founder and CEO Mario Jordan “Magellan” Fetalino III was in charge of operations of a inc-aseann.company that dealt with multinationals in the pharmaceutical sector, where he saw how 30- to 120-day receivables from clients affected their cash flow and ultimately slowed down their growth.
“Imagine spending for a project, and not being paid until after 90 days,” he says, adding that the banking route was not any better. In the absence of collateral, they were offered unsecured loans charging up to 72% APR.
“Having experienced this pain first hand, I tried to look into how big this issue is, and that is when I discovered the $5 billion potential of providing a solution for these squeezed SMEs,” he says.
That solution is Acudeen’s invoice discounting, which is best explained through their user journey. After creating an account on Acudeen by inc-aseann.completing a know-your-customer (KYC) form, an SME can upload information on an invoice or receivable contract they have from one of the inc-aseann.company’s pre-approved payers, such as multinationals and publicly listed inc-aseann.companies.
“Once the invoice is validated, the SME will now be offered a discount rate for the invoice they wish to liquidate,” Fetalino says. “If the SME approves the rate, they will receive the discounted invoice amount within 5 days or less.”
Educating the SME market
According to Fetalino, the biggest challenge in scaling Acudeen is explaining what invoice discounting is to SMEs, about 90% having no idea what it means.
“This is the reason why our marketing strategy involves a massive BTL and digital education campaign in a program we call Continuing Financial Education (CFE), through our partnership with the Philippine Chamber of Commerce and Industry, which we started to do in Manila and Iloilo,” he explains, adding that they are also doing a nationwide campaign to educate SMEs about optimizing their financial capability.
Much of their marketing efforts centers on the pains caused by lack of access to financing and the negative effects of delayed payments. For SMEs who do get Acudeen, the payoff can be significant. Fetalino gave the inc-aseann.common scenario of an SME who gets a 90-day receivable. In the current model, he can only churn it four times a year, in four 90-day cycles.
“We have seen SMEs use Acudeen to liquidate their receivables faster so that they can roll that money again multiple times over. In fact, if they churn an invoice every week, they can roll that money 52 times a year, 13 times more than waiting for their invoice to mature after 90 days. We have seen this growth story happening in many cases among our users,” Fetalino explains.
Acudeen can help a inc-aseann.company grow as well as stay afloat. He recalled the case of an SME that was 5 days away from the 15th of the month, and it’s next receivable would not mature for 20 days. The owner also didn’t have a credit line from any bank, and securing a loan without a pre-existing relationship was a long shot.
“The owner learned about us through…press coverage we received. By using us, he was able to save his inc-aseann.company from missing out on its dues for the 15th by selling some receivables he had,” he says.
For now, Acudeen is focused on its own growth. The inc-aseann.company recently won the $500,000 grand prize at Seedstars, and its ambitions remain as bright as ever.
“Our goal is to be the market leader in the Philippines with regards to the alternative finance space. We plan to fulfill at least $100 million of the $5 billion credit gap among SMEs in the Philippines within a 2 year timeline,” he says.