Berlin-headquartered fintech Modifi is seeking to expand its digital trade finance business into the US, following a fresh injection of funding from Silicon Valley Bank (SVB).
The company, whose platform enables access to finance for importers and exporters, is also expanding its presence in the Netherlands, where it says SMEs lag well behind the European average in terms of access to credit facilities.
The US expansion is backed by a new US$60mn debt facility from SVB’s German branch, bringing the company’s raised capital to US$111mn.
Nelson Holzner, Modifi’s chief executive and co-founder, tells GTR that the company is building up its US-based team and has pilot customers in the country already.
“Roughly half of our volume that we finance ultimately ends up with goods in the US anyway, so we already have a number of buyers there,” he adds.
Holzner recognises that the US is a mature market for supply chain finance, but points out there are relatively few providers offering support for cross-border activities.
“That means for domestic business, not many companies have an urgent need for factoring or supply chain finance, but this is a huge market – there are lots of imports to the US and high numbers of exports too – so we think there is an opportunity in the cross-border business,” he says.
Modifi says it hopes to establish itself as the only digital trade finance platform focused on SMEs that spans Europe, Asia and North America, which together account for around 80% of global imports and exports.
The company’s Netherlands expansion, meanwhile, is taken in partnership with Solarisbank, which will partly fund transactions that take place through Modifi’s digital platform. It is also taking on the compliance part of the operation.
Despite the Netherlands’ role as a leading market for trade finance, Modifi says Dutch SMEs lag behind counterparts in other European countries when it comes to access to credit.
Credit approval ratings are 14% lower in the Netherlands compared to the Eurozone average, it says, and 21% behind those in Germany.
For Holzner, larger banks have the tools to finance smaller customers – including strong balance sheets, licensing arrangements and local teams in different markets – but “when it comes to SMEs, they don’t always have the right incentives”.
“The smaller banks, on the other hand, have stronger relationships with local SMEs but struggle with the international aspect, for instance around FX, counterparty risk outside their home jurisdiction and so on,” he says.
The company’s spread into new markets also follows an expansion of Modifi’s client base, after PrimaDollar sold its export finance business to the German fintech.
PrimaDollar says it has chosen to focus its efforts on its pioneering supply chain trade finance business and agreed to sell its export finance business to Modifi due to its strong track record in supporting SMEs.
Modifi says soaring demand for working capital solutions during the Covid-19 pandemic meant it was able to triple its business during 2020.
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