COLLABORATE Corporation (ASX:CL8) is targeting the $120 billion finance market for SMEs through a strategic investment in fledgling lending platform FundX.
The ASX-listed company is making a $150,000 investment for an 8.33 per cent stake in FundX, a start-up backed by Sydney-based accelerator Blue Chilli.
FundX is described as a peer-to-peer invoice discounting and SME lending platform that helps fund business cash flow gaps by advancing payments based on outstanding invoices.
The Collaborate investment is a major fillip for FundX, which was founded by David Jackson, the entrepreneur who built S2M Digital into one of Australia's largest digital recruitment firms.
The move will allow FundX to license Collaborate's PeerPass verification platform, which will give it broader access to a range of trust and reputation criteria. Collaborate's CEO Chris Noone also joins the FundX board as a non-executive director.
"The local SME finance market is worth over $120 billion but very poorly serviced," says Noone.
"ABS data suggests that access to finance is the most common barrier to innovation, affecting around 400,000 businesses locally. It's a big problem that requires smart solutions.
"This is a great opportunity to disrupt the highly profitable yet inflexible and antiquated banking sector.
"The peer-to-peer nature of FundX enables investors to directly fund growing businesses and share in their success.
"We are very excited to be involved with FundX in exploring peer-to-peer and fintech opportunities in an SME market that is worth over $120 billion in Australia.
"FundX is able to leverage Collaborate's peer-to-peer and marketplace skills and knowledge, while we simultaneously address significant opportunities in the fintech sector."
Figures from the Reserve Bank of Australia show that loans worth less than $500,000 to Australian SMEs total more than $120 billion, while the Factoring and Invoice Discounting Association shows that invoice and factoring turnover is worth more than $60 billion per annum with more than $7.5 billion outstanding at the end of June this year.
Under the terms of the initial buy-in, Collabortae can double its shareholding in FundX for another $150,000 regardless of any increased valuation of the company.
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