INSTASUPPLY: PROVIDING SOLUTIONS TO THE CHALLENGES OF SMALL AND MEDIUM BUSINESSES
SMALL AND MEDIUM BUSINESSES MARKET OVERVIEW
In recent times, Small&Medium Businesses(SMBs) has been getting more attraction as more individuals now do more of Small&Medium Businesses. SMBs comprises 99% of the enterprises within the Organization for Economic Co-operation and Development’s 35 member nations (OECD) which is announced within the united nations as firms with less than 500 employees account for 97% of the total U.S enterprises.
Additionally, the global financial institutions has recognized the position of the Small and Medium Enterprises in the statistics for emerging markets that (SMEs) play a major role in most economies, particularly in developing countries owing to the fact that SMBs contribute up to 60% of total employment and up to 40% of national income (GDP) in emerging economies.
SMBs has been a major contributor in the U.S economy with SMBs producing up to 46% of the private nonfarm GDP in 2008 (the most recent year for which the source data are available) and the smallest firms in the SMBs especially those with less than 25 employees have been known to develop more patents per employees than large firms because small businesses are more likely to be innovators in their industry when compared to larger well-known corporations.
However, despite the economic and innovative contributions of SMBs, they still face the challenge of working capital that makes their businesses financially vulnerable.
THE PROBLEMS
Before we discuss the problems faced by SMBs, it is imperative to know the payment process in the SMBs which differentiate it from other businesses.
In B2P payments, businesses constantly manage both the send and receive side of the equation which is referred to as the purchase-to-pay process for a buyer and the order-to-cash process for the supplier. This process often takes days, sometimes months to be completed and the efficiency of these processes a direct effect on a company’s cash position. The symmetry of this interaction is that one company’s payable is another company’s receivable in general accounting.
THE PROBLEM OF LATE PAYMENTS
Late payment processing time has been a major issue faced in most SMBs as around 47% of businesses are paid late which result from either an international delay in payments by customers or long and prolonged payment or both.
In 2017, Atradius reports that 48% of all B2B invoices were not paid as at when due in America causing late payment to be the highest challenge in the United States and the lowest in Canada.
Similarly, 44.6% of domestic invoices were not paid in the Asia Pacific as at when due in the same year 2017 with India the country with the most impacted by late payments where 56.4% of B2B invoices were paid late.
In Europe on the other hand, an average of 41.9% of domestic B2B invoices remained unpaid past the due date with average payment duration of 59 days in 2017.
However, not only the late payments has been a major problems in SMBs but the banks have curtailed their lending to small businesses since the financial crisis and now lending of loans have only been channeled to large businesses which has made small businesses unlikely to obtain loans than large firms rather they depend on internal funds and cash from friends and families to launch and initially run their businesses.
The access to finance on a global scale by SMBs in comparison to large businesses has remained one of the most significant constraints to the growth, productivity, and survival of SMBs and therefore the job they create.
The credit gap of SMBs has been a major problem on both sides of a B2B transaction as most SMBs cannot get access to credit because bankers cannot see the critical information required to assess their credit worthiness which eventually results in a lack of financial intelligence and insight to make decisions for bankers on the demand side.
On the supply side, banks consider SMBs a high risk and unfit to serve at high interest rates proposed to be charged by the banks. Small medium loans which are often defined as loans below $1 million are often considered not as profitable as large business loans by banks with the transaction cost to process $100,000 loan and $1 million loan being comparable with less profit.
These two reasons has consequently causes the financial instruments of SMBs to operate in thin, illiquid markets with a low number of market participants as banks prefer to lend loans to large businesses hence the need to proffer a lasting solution to help salvage the situation is essential
INTRODUCING INSTASUPPLY
InstantSupply was founded in 2014 in late by Lee Pruitt and Tim Huegdon with the view to simplify all buyer and supplier business interactions online born out of their prior experiences.
InstaSupply provides a workflow for buyers and suppliers to manage their payments and collections respectively. There are over $60 million worth of invoices passing through InstaSupply on an annual basis with over 2,000 businesses currently using the platform.
The InstaSupply platform also collects data from both the buyers and the suppliers by creating a business network between the both sides and also empowers users to create and place purchase orders, track deliveries and match orders to corresponding invoices which gives buyers the ability to track, manage and control their spending and customers on the platform are able to review the invoice in real time and accept or reject it if does not meet their requirements upon receiving the invoice. The invoices are however paid outside the InstaSupply platform once they have been accepted with the data being pushed through to the customers accounting software which requires the customer to manually record on InstaSupply when an invoice has been paid.
Automated approval is also a vital part of the InstaSupply project because it creates the opportunity to provide financing. Automation reduces human input by 90% resulting in suppliers being paid in due time and more accurately eventually solving the manual approval of invoices in the previous approval processes without technology and automation rules in which there is likelihood of human error, creating open space for fraud and also delaying payments to suppliers.
The development of payment facilities will benefit both buyers and suppliers as developing the payment portal within the platform will ensure that the complete procurement cycle will go through InstaSupply, creating security while also eliminating any risks associated with transferring data between platforms.
InstaSupply also aims to utilize user-managed “Automation Policies” on the InstaSupply platform so that one of two actions can occur upon the approval of an invoice and this is a low risk that enables InstaSupply to offer very competitive rates in comparison to traditional financial products, as InstaSupply has data on all parties involved which enables InstaSupply to measure risk far more comprehensively.
InstaSupply also provides an opportunity of lending for small businesses based on the PayBlok tokens asset which serve as the guaranteed collateral of loan with up to 60% value of the loan in custody as PayBlok tokens and the interest rate applied on these transactions is as low as 1% since the transaction is de-risked using those assets to cover any losses which eventually saving business from selling assets in time of market fluctuations.
If at any time, the market value of the PayBlok tokens used as collateral drops below the current debit, InstaSupply is entitled to sell the tokens at market price and cover the loan.
THE PAYBLOK TOKENS
PayBlok is an ERC20 standard crypto asset of InstaSupply that provides its owners/holders the access to the benefits of the InstaSupply platforms.
However, the PayBlok ownership does not mean a stakeholder right in the InstaSupply company but not limited to profits, vote of employment.
PayBlok tokens enables InstaSupply to offer a range of products to solve the problems faced SMBs as outlined above
CONCLUSION
InstaSupply will be proffering lasting solutions to the challenges faced by SMBs and provide them with the opportunity
to have access to credit to launch and run their businesses with no barrier. The PayBlok enables the InstaSupply to provide products to solve the problem which consist of an integrated payment solution, supply chain financing and asset-based lending.
For more information on InstaSupply and how to participate in the ongoing PayBlok token sale kindly visit the following links
Website: https://payblok.instasupply.com/
Whitepaper: https://assets.ctfassets.net/5vuk877t9hxd/3NAfrZaazmEk6emsaikqiW/87fb62e129789d978720d85d56c49e0e/payblok_whitepaper.pdf
Author
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