Each year, hundreds of thousands of businesses acquire short-term loans using accounts payable invoices as collateral. This industry is called factoring and moves $3 trillion per year worldwide. Factoring is not only a service for companies that manufacture goods; the model has made its way into all types of industries. From professional services and transportation services to construction companies and government contracts, factoring services can be found among nearly any business-to-business transaction.
Chile has an extremely well-developed factoring industry, mostly due to the fact that electronic invoicing is mandatory for Chilean companies. As a result, the factoring route is a relatively easy process for any Chilean company in need of a quick financing solution.
However, the industry is just now taking off in the rest of Latin America and that’s where a new startup, Portal Finance, comes in. With offices in Bogota and Santiago, Portal Finance’s proprietary technology allows small and medium-sized businesses the mission-critical capital they need by providing the most business-friendly terms from factoring companies. The company also evaluates electronic invoices from companies and provides this information to investors, which allows investors to make financing offers much more quickly and transparently.
We sat down with the CEO of Portal Finance, Diego Caicedo, to learn how the world of factoring is changing and what makes his company stand out in this space.
Can you tell our readers a bit about you and why you started Portal Finance?
My team and I started Portal Finance when we were approached by eInvoice companies from Chile and asked to help them expand standardized electronic invoicing in Colombia. eInvoicing is a service with little upside, however, the information and data generated are of immense value for developing financial services that leverage this data.
We started working on invoice financing, or factoring, alongside seasoned veterans and quickly learned about the pain points in the industry. The lack of automation and standardized risk generated an industry with a lot of manual processes and little true visibility into the risk exposure of the financing companies.
We set out to deploy our first API and analytics service in December 2016 by partnering with one of Latin America’s largest eInvoice networks. Together, we are scoring over 1.5 million invoices per month in Chile, focused on generating leads and business intelligence for financial institutions that seek to expand their traditional factoring operations.
What makes Portal Finance stand out from other companies in the factoring industry?
Current technology companies focused on financial services that serve companies rather than banks have developed complex business stacks. They are focused on digitizing the paper run processes, however, all decision points still depend on an executive’s experience and expertise which makes their business models difficult to scale. The decision to finance an invoice depends on the company’s account managers and their experience. Therefore, decisions and pricing are based on necessity and not on risk.
The Portal Finance system focuses on three main areas. The first, which is the base for everything else, is to determine both the credit and operational risk of each invoice. Once an invoice is scored, workflows are customized based on the risk profile, allowing automatic processing for low-risk operations and optimized workflows for riskier operations.
The second is Portal Finance’s analytics package which allows current executives to gain key insights about their clients. With our tools, executives can better understand their clients, their invoicing cycles, volumes, and use this data to make better offers and improve their agents’ ability to upsell to their current client base.
The third area of focus is on financial services. We offer companies easier access to third-party financiers so they can leverage and manage their exposure to their client base, and therefore, maximize their returns for every client in the system.
Can you elaborate a little bit more on how Portal Finance supports key financing decisions?
One of our key differentiators is that we aggregate data from a dozen or more sources into an analytics suite that allows decision-makers to be able to gain better insights into their current operations as well as understand the risk profile of transactions – both from a creditor’s and an operational point of view. This allows decision-makers to start automating processes for lower risk processes and to make better decisions on high risk / high reward transactions.
Are there other companies in this space that you look up to?
There are many companies. For example, TalaMobile is doing some great work with personal loans using a proprietary risk and distribution network – similar to what we hope to achieve for small and medium enterprises.
To learn more about Portal Finance, visit portalfinance.co.