Selling to large Western customers can be game-changing for SMEs in developing markets, allowing them to expand rapidly and create new wealth. However, these SMEs need access to finance in order to meet the demands of large buyers with complex supply chain requirements; without it, they are unable to take advantage of trade opportunities, and the trade finance gap may be as high as $1.7 trillion.
Twinco Capital, a trade finance specialist, hopes to aid in the resolution of this issue. The Amsterdam- and Madrid-based fintech startup is announcing today a $12 million funding round that it hopes will give it the ammunition to assist more small and medium-sized enterprises (SMEs) in competing for lucrative contracts in the apparel industry.
The company’s CEO and co-founder Sandra Nolasco, along with COO Carmen Marn, claims that their method of handling trade finance is novel. “We are the very first company to offer a global supply chain finance solution that starts funding at the very beginning of the production cycle,” she says. This is something we do on a global scale, with both large and small vendors.
Historically, the paradigm for supply trade financing has been different. If a supplier receives a $100,000 order from a major retailer, it will fulfil the order and issue an invoice. Rather than waiting for the customer to pay its bill, the supplier can obtain working capital from an invoice finance provider.
Twinco, on the other hand, will give the retailer instant access to the funds once the order has been placed. Nolasco explains that many smaller companies lack the capital to buy enough supplies and hire enough workers to fulfil an order from a major international retailer. So, Twinco’s money can make sure the small business doesn’t lose out on that kind of work because it doesn’t have enough money to finish an order.
If a t-shirt factory in Bangladesh were to receive a $100,000 order from a European high-street retailer, for example, the company might approach Twinco for a loan of $60,000. The manufacturer would then be able to fulfil the order and submit the invoice for payment, at which point Twinco would receive its money back.
Nolasco elaborates, “We want SMEs in every market to be able to participate in global trade. We have zeroed in on the issue of funding because it is a major barrier to progress.
Twinco has direct relationships with Western retailers, who provide the company with information about their suppliers and their track records, such as whether or not orders were fulfilled on time and to specification. Twinco’s systems analyse the information to determine a supplier’s creditworthiness, allowing the company to extend credit at an earlier point in the trading cycle.
Both customers and vendors can benefit from this model. They can work with a wide variety of suppliers without worrying about their credit, and retailers can gain visibility into their supply chain thanks to the wealth of information collected by Twinco’s systems about their vendors’ commercial, financial, and sustainability performance. The latter are able to secure the financing vital to bid on and complete more lucrative contracts, thus ensuring their continued development.
Twinco’s rapid expansion since its 2019 debut has been widely reported. Bangladesh, China, Pakistan, South Korea, Turkey, Thailand, Vietnam, and Indonesia are just some of the 12 countries it partners with for its apparel. So far, it has given these vendors a total of $150 million in funding support.
Nolasco has big plans for Twinco’s future and is looking for ways to expand the company’s reach among its current clientele as well as find new ones. She explains that while the fashion industry is the first target for reform, wider changes are possible. Possible future expansion into automotive and electronics makes sense because these are two industries in which established companies in developed markets often rely on the services of a network of smaller, global suppliers.
The funding announced today should give Twinco the boost it needs to actively pursue its goals. Quona Capital is the lead investor in the $12 million equity and debt round, which also includes Working Capital Innovation Fund and returning backers like Mundi Ventures and Finch Capital. According to Monica Brand Engel, co-founder and managing partner at Quona, “Twinco is focused on a significant pain point in the massive and underpenetrated market that is supply chain finance.”
Twinco plans to use the funds in order to speed up its expansion into the key markets that Western retailers typically source from, as well as to strengthen its technology and data capabilities, especially in regards to environment, social, and governance (ESG) data. In addition, Twinco hopes to finalise a $100 million debt facility in the first quarter of this year.