Small business finance company Butn Ltd made its debut on the Australian Securities Exchange on Friday, signalling its plan to grow its presence in what it calls the “transactional funding” market - its variation on invoice financing.
The company raised A$20 million from its initial public offering and listed with a market capitalisation of $80 million.
Over the five years the company has operated it has originated $500 million of SME finance. It originated $166 million in 2019/20.
Butn says it has a significant point of difference from other finance companies in the field. According to its prospectus: “Typically, funders require SMEs to commit to minimum volumes – a whole of book approach – or minimum facility fees as a prerequisite to providing financing.
“Butn’s approach is to provide finance to its customers on a transaction-by-transaction basis for a fixed fee per transaction.”
It claims to be able to do this because it has developed a technology that “digitises and automates” the funding process, “integrating into third party platforms such as CRMs, marketplaces and B2B aggregators”.
This allows it to “profitably target smaller transaction amounts and smaller customers, where previously the processing costs may have made them unviable to service.”
In January it partnered with MYOB Australia, which also acquired a 19.9 per cent shareholding in Butn.
Co-founders, joint chief executives and executive directors Walter Rapoport and Rael Ross both have backgrounds in the invoice discounting and factoring sector.
The company earns revenue by charging a fee of between 2 per cent and 5 per cent on each transaction. Funds are typically repayable with 30 to 90 days. It turns over its book an average of six times a year.
Its receivables book is funded through an existing $40 million corporate bond structure. It will use the majority of funds raised in the IPO, as well as $12.5 million raised pre IPO, to grow the receivables book and expand its platform to other partners.
It earned revenue of $4.7 million in 2019/20, up from $3.2 million the previous year. It made a loss of $359,000 in 2019/20.
Bad debts as a proportion of total originations in 2019/20 was 10 basis points.