Twinco Capital raises $12 million to close $1.7 trillion trade finance gap.
The Madrid company announced the Series A round on its LinkedIn page Tuesday (Jan. 24). It is led by Quona Capital with help from existing investors Finch Capital and Mundi Ventures, along with a portion of venture debt by Zubi Capital.
“With this major milestone, we want to accelerate our expansion within major source countries and strengthen our technology and data capabilities, especially in relation to ESG,” the company said.
The $1.7 trillion gap – a widely reported estimate – represents the gulf between the demand for trade finance and the supply of such funding. Small and medium-sized businesses (SMBs) are likely to be the hardest hit by this gap, often struggling to find funding.
Twinco co-founders Sandra Nolasco and Carmen Marin discussed this issue in an interview with PYMNTS in 2021.
Their company works with corporate buyers who want to start a financing program with their vendors and offers suppliers financing their purchase orders instead of their invoices.
“Traditional supply chain finance methods are invoice financing, and therefore, payment terms,” Nolasco said.
“Purchase order financing means reducing the financing costs involved in the entire chain, not just shifting the burden from the buyer to the supplier.”
By financing the point of purchase order, he argues, small vendors can finance their need to access raw materials and manufacture goods to fulfill their orders.
Relieving the pressure on working capital at the start of the production cycle can strengthen their financial position before a business sends an order and risks late payment.
This type of financing can work alongside other financing methods, Nolasco added, but SMBs, especially in emerging markets, often face a lack of options when traditional banks unable to underwrite small borrowers.
Twinco’s new funding round comes at a time when digital technologies are driving innovation in the field of trade finance, leading to faster decision-making and streamlining of the process.
“In the past, trade finance was plagued by lengthy risk assessment and underwriting processes, and accessing credit could take days or weeks, especially if it was the first time the business had done so,” letter to PYMNTS earlier this month. “But as the digital toolkit deployed by banks and their partners has improved, the lending process has been greatly accelerated and many trade finance loans can now be approved and disbursed on the same day.”
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