Fin Tech Company Addresses Ongoing Effects Of Covid-19 And Supports Diverse Businesses
Now, the Atlanta-based FinTech company co-founded by Stacey Abrams and Lara Hodgson announced today $29M in financing from a new credit facility and an additional equity investment led by Brigade Capital Management LP and Virgo Investment Group. The new credit facility will enable the company to serve more small businesses with its innovative payments acceleration solution when the needs of small and diverse companies have never been greater. The additional equity investment will be used to scale company operations further and enhance its suite of offerings to meet the evolving needs of its clients as they feel the ongoing effects of Covid-19.
"During the pandemic, customers have roughly doubled the length of their payment terms with their suppliers, meaning companies are taking nearly twice as long to pay, and suppliers are waiting twice as long to be paid," said Lara Hodgson, CEO, and co-founder of Now. "For example, Pre-Covid took B2B companies an average of 48 days to collect account receivables on a Net-30 invoice. Since the pandemic hit, it has ballooned to over 70 days."
According to a joint study by the World Bank, the Cambridge Centre for Alternative Finance at the University of Cambridge's Judge Business School, and World Economic Forum, the fintech market has continued to help expand access to financial services during the Covid-19 pandemic—particularly in emerging markets—with strong growth in all types of digital financial services except lending.
Late payments on invoices can restrict businesses' cash flow and potentially force them into debt as they try to keep up with client demands, bring growth to a halt, or even cause a business to grow to death. So it's a payment solution that allows B2B companies in the US to generate up to $50MM in revenue to be paid within two business days.
"Small businesses often carry tremendous financial burdens, while at the same time accounting for trillions of dollars of B2B commerce annually," said Hodgson. "Providing businesses with an invoice payment acceleration solution enables them to access the capital needed to grow their business fearlessly as they serve more customers and engage in more commerce."
The new funding comes on the heels of an announced $9.5MM in funding in June of this year, led by Virgo, with participation from Cresset Capital Partners. Since the pandemic in Spring of 2020, Now has seen increased demand for their services as invoice payment times have ballooned from an average of 48 days to more than 70. Over the last 10 years, the company has facilitated more than $700M in invoice payments, serving more than 1,000 small businesses.
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"Stacey and I met in 2004 in Leadership Atlanta and began a long relationship," said Hodgson. "This is our third startup together. We were inspired to create Now in 2010 because of our personal experience and past challenges growing a consumer products company that we had founded."
Ms. Hodgson explained that they began selling to larger customers when they grew their previous company, Nourish. They noticed that these companies were taking increasingly longer to pay them. Since the success of a business can be greatly hindered by its cash flow and ability to scale its company, Nourish was, as Hodgson put it, "essentially growing to death."
They were advised to get a line of credit or a factoring contract or raise more equity.
"It didn't make sense to borrow money when we were the ones effectively loaning money (for free) to our larger but slower-paying customers," Hodgson shared. "Finally, Stacey and I realized that we had a payments issue and a need for an innovative, nontraditional solution. So, we started Now to enable growing small businesses like ours to get paid immediately without turning to loans or factoring."
The Rapid Growth of Fintech
The Fintech industry continues to grow rapidly and attract top investors. According to CB Insights, the space has raised $13.4 billion in the first quarter of 2021. In 2018, the global fintech market was worth $127.66 billion and had a predicted annual growth rate of ~25% until 2022, to $309.98 billion.
It would seem that overall, the fintech space is becoming increasingly crowded. When asked what sets Now apart from other companies like Stripe, Klarna, and Kraken, Ms. Hodgson responded, "Other payment companies focus on helping buyers of goods and services, usually the consumer, initiate and manage payments easier, leaving the sellers of the goods and services to be paid when and how the buyers elect to pay. Now enables the sellers to choose how and when they are paid independent of how and when the buyers pay. This means a small or mid-sized business owner can successfully grow their business instead of growing out of business."
Hodgson adds that they are also different in part because they focus exclusively on the B2B market. For example, a company with a NowAccount delivers goods and services to its business or government customer as usual and sends the invoice to its customer. But instead of waiting for 30-90 days to be paid, they can simultaneously process the invoice on their NowAccount and get paid within one to two business days instead of one to three months for a one-time, flat processing fee with no interest. That's not a loan—that money is the business' actual revenue. Their customer then pays their invoice just as they normally would.
Paying it Forward Literally
One of Now's goals is to create a world where diverse businesses of all sizes have access to customers, capital, and commerce.
"We strongly believe in supporting women-owned businesses," Hodgson states. "Our team is 50 percent women and 50 percent minority, and Now began as a WBENC-certified women-owned business. We're incredibly passionate about empowering more women to have opportunities to start and grow their businesses."
This includes women and underrepresented minorities. Now wants to help diverse entrepreneurs overcome that challenge by leveling the playing field for small and mid-sized businesses and historically underrepresented minority-owned B2B companies. "We do this by approaching the 'access to capital' problem with a payments solution, strengthening our clients' balance sheets by enabling growth and cash flow without the debt, liability, or risk that comes with loans, lines of credit, and factoring," Hodgson explained.
When asked what the plans are for the future, Hodgson answered, "Creating a world where diverse businesses of all sizes have equal access to customers, capital, and commerce. Moreover, enabling these businesses to get paid immediately is a game-changer for the economy."