TrustBills to Offer Put Options from January 2021
- Trade Finance
- 17.12.2020 03:36 pm
Once again, Hamburg-based FinTech TrustBills is disrupting the factoring market: From January 11, 2021, the marketplace for unpaid trade receivables will offer companies a sell-off guarantee (Put option). This means that companies that already know that they will be regularly supplying a customer over a certain period of time can get a guarantee to sell-off these receivables up to a defined amount to an institutional investor such as insurance companies, pension funds and their asset managers, banks and factoring companies in return for a Put option premium.
"Before the Coronavirus pandemic, companies were focused on reducing their cost of capital. This meant that investors were competing for the most attractive assets. Since the second wave, however, this has changed: Investors have adjusted their risk appetite and receivables financing for companies has become more difficult, not least due to the precautionary measures taken by many credit insurers," explains Joerg Hoerster, founder and CEO of TrustBills. At the same time, companies need planning reliability right now - but without the negative attributes of classic factoring. What Hoerster alludes to: In traditional factoring, companies enter into framework agreements that are not always advantageous for the selling companies. There is hardly any pricing transparency, for example, but almost always obligations to tender and, due to the retention, there is rarely any real balance sheet relief. With TrustBills, this is completely different, emphasizes Hoerster: "Anyone who decides to use TrustBills Receivables Exchange can decide with complete flexibility which volumes are to be sold and over what period of time."
The Hamburg-based company has been revolutionizing the factoring market since 2017. Even without the new Put options, customers can sell their unpaid B2B invoices to institutional investors either at a fixed price or via the auction on TrustBills Receivables Exchange. Whether the sale is undisclosed or disclosed is up to the companies. In any case, invoicing is automated in the same way as tax treatment, payments and, if necessary, dunning.
"The addition of Put options to our marketplace was the next logical step," says Hoerster. After all, TrustBills Receivables Exchange combines security with a transparent bidding competition anyway. With Put options, companies still remain flexible, but could increase planning reliability within their liquidity management.
The subsequent process is - as always with TrustBills - simple and transparent: specify the debtor, define the desired period and required financing volume and wait for the investors' financing offers to arrive. Once the company has confirmed an offer from an investor, it is guaranteed to be able to sell its receivables against the specified debtor within this framework. The trick is: Each individual receivable goes into a bidding competition among investors despite the Put option, so that companies can be sure of getting the best price for each receivable. Only if no investor outbids the financing partner of the Put option the receivable is sold within its framework.