For FinTech entrepreneurs looking to launch or scale a new financial product, securing the right capital can be a crucial determinant for the success and trajectory of your business. Beyond the universal challenges of scaling a tech start-up, FinTech entrepreneurs face a unique set of operational and financing demands. Choosing the right financing strategy, structure and partner early in the journey is paramount and can have an outsized impact on the trajectory, scalability and profitability of your business.
When it comes to raising debt capital, commonly referred to as ‘venture debt’, one size does not fit all. Traditional venture debt models may overlook and underserve the specialized nature of FinTech financing needs. Instead, asset-backed financing can be a powerful strategy that’s tailored to the industry’s distinctive needs and characteristics.
Unlike conventional venture debt, where a company’s stage, revenue profile and often investor base / capital raising history are key determinants in securing and sizing borrowing ability, asset-backed financing looks through to the company’s underlying assets to better align capital investment with the specific financing needs of FinTechs.
Asset-backed financing, achieved through structured warehouse (or similar) facilities, enables FinTechs to tap into immediate capital by leveraging their asset pools, whether they are loans, receivables or physical assets. This approach offers the flexibility, through tying funding availability to the asset base such that it reduces negative carry, and scalability given funding availability grows with the asset base (rather than shrinking through amortization payments) that traditional venture debt structures often lack. With a proven history of performance, these assets become the foundation for unlocking substantial funding for rapid and sustainable growth.
This model not only fuels growth but also attracts the interest of established financial institutions for larger securitization facilities. A partner with asset-backed financing expertise can help an early stage FinTech develop the right policies, processes and structures to pave the way for additional growth. The virtuous cycle continues as the company’s asset portfolio grows, aligning FinTechs for success with larger financing partners and eventually access to rated securitization vehicles.
Partners for Growth (PFG), in particular, has a track record of successfully supporting early growth stage FinTech companies with facilities that expand as capacity requirements increase, new products and jurisdictions are introduced, and there is performance history. Unlike many capital providers that are solely U.S./North America focused and are constrained by geography, PFG has long maintained a global profile.
Who can benefit from this approach?
Any business holding or originating substantial assets can harness asset-backed financing to their advantage, be they loan receivables, invoices, trade receivables, vehicle fleets, real estate or an entirely new asset class.
Selecting the right debt financing partner is pivotal. Seek a lender with a track record of asset-backed financing in the FinTech realm, someone who truly understands the sector’s dynamics. Flexibility, creativity, and alignment with your company’s goals are key attributes. Don’t be swayed solely by the loan size which can come with large undrawn line fees but look for an initial facility that suits the businesses “portfolio” funding needs for the next 12-18 months, and then focus on the ability for the financier to scale with you—remember that if the asset is performing, the Lender will likely want to continue supporting the business through upsizing the existing Facility. Prioritize a partner who customizes terms based on your unique asset book and has the experience to help propel your business forward through the inflection points of growth along the way.
At Partners for Growth, we’ve been at the forefront of innovative financing since the 1980s, fueling growth for emerging technology-oriented companies across sectors. Our expertise in tailored lending solutions goes beyond conventional offerings, ensuring that your FinTech venture receives the right financial support for sustainable expansion. Contact our specialty lending team to explore how asset-backed financing can elevate your business strategy.
Partner with PFG for financial solutions that align with your FinTech journey.