Financing Platform Marco Raises $26M to Support SMEs in Latin America
- Lending , Investment
- 22.09.2020 10:42 am
Marco Financial—the first tech-enabled financing platform built for small and medium-sized Latin American exporters — announced it has secured $26M in funding and credit that will enable the company to address the $1.5T global trade finance gap that disproportionately impacts small-and medium-sized (SME) businesses. Marco supports SMEs based in Latin America, where a $350 billion trade finance gap blocks many exporters from the U.S. market. The funding includes an equity round, led by Struck Capital and Antler, and a credit facility underwritten by Arcadia Funds, LLC.
“As a former owner of a small business in Latin America, I saw firsthand how SMEs in this region struggle to access trade financing that will let them export their goods while retaining enough capital to keep their business running,” said Peter D. Spradling, COO and co-founder of Marco. “Access to trade finance is one of the greatest hurdles in business operations. The traditional system, dominated by banks, simply is not working anymore. It disproportionately hurts SMEs, restricts economic mobility and stifles job creation in emerging markets. With equity funding and a material credit facility we can serve this disadvantaged market in Latin America and help build a healthier, more equitable trade ecosystem reflective of an increasingly borderless global economy.”
SMEs are growth-drivers of international trade, accounting for 60% of total employment in advanced economies and 80% in developing countries, including those in Latin America. Yet these exporters face massive financial hurdles due to long payment cycles. The gap between when goods are shipped by the exporter and when the buyer submits payment can last 2-4 months, an impossibly long wait for SME exporters who often lack the capital to maintain operations while waiting for payment.
Banks, traditionally the primary providers of trade finance to address these challenges, reject 50% of SME financing applicants and largely retreated from SME trade lending in the tighter regulatory climate following the 2008 financial crisis. The impacts of this trend have been greatly amplified by the conservative liquidity approaches banks have adopted in response to the Covid-19 pandemic.
Marco addresses this financing gap by providing fast and easy financing to Latin American SME exporters selling to U.S. buyers with an innovative due diligence process that leverages real-time data to dynamically assess risk and mitigate capital loss. Marco’s platform shortens the loan origination timeline from 2+ months to one-two weeks and provides funding to approved exporters within 24 hours. Marco streamlines the loan origination process and provides SMEs with much-needed operational capital—at highly competitive rates—with speed and ease unmatched by banks and traditional lenders.
“We look for companies that not only target massive, sleepy industries but also for ones that are led by management teams with fresh perspectives and asymmetric information that position them to upend incumbents,” said Yida Gao, partner at Struck Capital. “In short order, Marco has assembled a world-class team to tackle the multi trillion-dollar trade finance market in a post-Covid time when SMEs around the world need, more than ever, reliable capital to fund operations and growth. We are excited to be part of Marco's journey to support the suppliers that are the backbone of global trade."
Marco’s credit facility, underwritten by Arcadia Funds, LLC., is the largest issued to a venture-backed pre-seed company, signaling confidence in Marco’s team, mission and approach. This comes on the heels of the July 1, 2020 United States-Mexico-Canada Agreement (USMCA), which seeks to create more balanced, reciprocal trade between the three countries. Additionally, recent heightened demand for exports and rapid technological innovations, like digital trade finance networks, reduce many barriers SMEs face in accessing trade finance. However, banks’ retrenchment, exacerbated by tighter regulations in the global pandemic and coupled with their hesitation to fully digitize documentary transactions, leaves credit-worthy SMEs needing fast, easy alternative financing options.
“For smaller businesses in Latin America, accessing trade finance to export their goods is a major concern and a top reason why many don’t succeed,” said Javier Urrutia, Director of Foreign Investments at PROCOLOMBIA, an organization that promotes foreign investment and non-traditional exports in Colombia. “In Colombia alone, a 1% increase in exporter productivity in our textile industry would result in 500,000 new jobs for the country. We support Marco’s effort to help ease barriers to trade for these SMEs, close the $350B trade finance gap in Latin America and spur export volumes and economic growth in the region especially in these times of supply chains relocating to the Americas, where Colombia’s SMEs will thrive.”
The $350B trade finance gap in Latam also disproportionately affects nontraditional businesses, such as female-owned enterprises. Marco’s mission to close this gap by removing traditional barriers to financing aligns with the United Nations 2030 Agenda for Sustainable Development as well as with the UN Sustainable Development Goals, which includes the elimination of gender inequality, positioning Marco not only as a robust financing arm, but also as growth driver for lasting international development in emerging economies.
According to the BCG Trade Finance Model, global trade is expected to hit a new high of $25 trillion by 2027, growing at a CAGR of 3.3%. Marco’s initial focus on Mexico, Uruguay, Chile, Colombia, and Peru is based on personal networks, ease of doing business, electronic invoicing policies, regulatory and taxing benefits and economic stability, among other factors. This strategic focus allows the company to build region-specific models that offer unprecedented insights into the risk profiles of SME exporters. Marco’s financing approach leverages technology to improve these unique risk models and to permanently monitor accounts. It takes advantage of advanced credit and risk applications available, and communicates directly with the local trade and tax authorities of each country to verify invoices and exports.