The next big financial opportunity in Asia-Pacific
At a glance, it could be argued that small business owners have more choices than ever before to get the working capital they need, as FinTechs, neobanks and traditional lenders all compete to offer loans and lines of credit. But the options available are not always viable options, as the requirements for getting approved for funding vary widely and disqualify many small and medium-sized business (SME) borrowers – while discouraging countless others from even applying.
“We tend to think of Asia as one big homogeneous region, but in fact it’s really a lot of fragmented markets, which means very different regulatory requirements in every city and country,” said Zetl General manager Shan Han. “So that’s part of the reason the FinTech revolution may have dragged on a bit here, compared to the west.”
Han believes this slower rollout of modern digital financial services and solutions in Asia-Pacific means the region’s SME and SME financing gap is even worse than elsewhere. This makes it a very difficult environment for most small business owners, but for a startup like Zetl whose sole focus is helping struggling SMEs and startups, it’s a potential gold mine.
Han said there is a huge unfulfilled opportunity to bridge the gap between accounts receivable and accounts payable, whether through debt-based or income-based financing.
“Legacy funding is very well suited to serve large businesses in the region, but in the SME and SME space, businesses have really been underfunded and this is where we are looking to solve the problem,” Han said. “For many business owners, the only options are to either tap personal credit or sell stocks. But for a fast growing company, selling stocks can be very expensive. “
The price of approval
While non-conforming loans from companies like Zetl are admittedly more expensive than the interest rates offered by traditional banks, Han justified the premium that is charged, explaining that customers are happy to pay a little more for it. which he describes as “adapted” finance.
“The truth is, most of our clients are looking for short-term working capital financing needs,” Han said. “For the most part, their options are either being stuck in a relatively cheap loan for the next three to five years, or you can just take out financing for two months and not have to worry about having that big debt on your bank. balance sheet.”
Small businesses are also often in a rush, and again, customers are often happy to pay a little extra for quick service or a better chance of getting approved. By its nature, short-term funding usually needs to be available very quickly. Han said Zetl is able to onboard new businesses and get to know your customer (KYC) inside out in a week, and once that is done, he can provide same-day financing to them at any time.
“So for many clients, it’s not just the cost of the funding itself, but also the time they spend looking for that capital,” Han explained, noting that companies often spend weeks or weeks. months researching and compiling the documents needed to obtain capital rather than focusing on their own business.
Lower rates for those who digitize
To be able to finance young startups, many of which do not have a credit history or report to speak of, Zetl has developed a proprietary credit model that relies on alternative data. The company has a clear “digital first” approach where virtually the entire information gathering process is automated. Zetl isn’t a big fan of paper documentation, and he goes to great lengths to encourage the companies he works with to go more digital as well.
In fact, Zetl is such a big supporter of helping its customers with their digital transformations, it even offers financial incentives if they are willing to accelerate these initiatives.
“If they can switch, for example, to cloud accounting software that we integrate with, then we can certainly offer preferential rates,” Han said. “We use these kinds of carrots to try to encourage our prospects and customers to adopt a more digital method that not only helps us but also helps them in their operations. “