Nufin Data aims funding options at Malaysian SMEs

• SC-approved NEMO provides a supply chain financing platform
• Provides funding based on trade rather than track record

WE KNOW that SMEs form a central pillar of the Malaysian economy – after all, 98% of business establishments in the country are SMEs, contributing to more than 38% of the national Gross Domestic Product (GDP).

What we don’t usually know are the challenges SMEs in Malaysia face when it comes to funding their working capital and scaling their business due to difficulties in raising funds or obtaining loans.

This is why alternative financing methods – means that range from P2P lending to Equity Crowd Funding (ECF) – are growing in popularity. And now another hat has been thrown in the ring, carrying the name NEMO.

NEMO, which stands for “New Efficiencies, More Options”, is a cloud-based financing platform from Nufin Data, a Singapore-based fintech firm. NEMO intends to bring faster, easier financing to SMEs.

"Traditionally, it’s a lot of hassle and a lot of time is taken for an SME to submit documents to get financing. NEMO makes it easy for businesses to digitise and submit their documents on the platform, giving them access to fast cashflow," says Nufin Data managing director Denise Ang.

"We understand the pain-points faced by SMEs and endeavor to find the best possible financing solutions for them. Our consultants work with our customers to understand their business’ trade flow and cashflow pains, and instead of relying solely on historical financial statements, we look into alternative ways of risk mitigation through data, visibility and control," she adds.

Financing through trade

NEMO provides a supply chain financing platform, which essentially allows SMEs to get financing through their trade rather than their financial records. Traditionally, financial institutions provide loans to businesses based on their track record – understandable, as it mitigates the risk of defaulting.

The downside is that it’s slower. According to Ang, longer customer payment terms are creating a cashflow crunch for many SMEs. A supplier, for instance, may have already delivered their goods to a buyer with an invoice issued. They may already want to move on to their next business dealing, but without the funds, they can’t proceed.

With NEMO however, companies can get financed through their invoices. The platform leverages on strong buyers with good credit to enable their suppliers access to lower-cost financing. This is offered by Nufin Data’s own proprietary fund and partner funders.

"Increasingly longer customer payment terms are creating a cashflow crunch for many SMEs. With NEMO, SMEs can now easily upload their trade documents onto the platform and access financing quickly," Ang adds.

Faster and better

At its core, NEMO serves as a digitalised factoring platform, essentially a funding method that allows a business to obtain immediate capital based on future income attributed to their invoices. According to Ang, the Securities Commission of Malaysia (SC) has given them the green light to proceed with NEMO.

There’s more to the financing than just an invoice submission. Ang says that NEMO goes in to understand a company’s trade flow to determine their gaps and who they are trading with before coming up with a structure “in such a way that we leverage on the stronger party to help them lower costs and open up more lines.”

“We believe that value-added tools for SMEs can help them with better decision-making,” she adds. NEMO features tools like e-invoicing, letting people digitalise their invoices for easier submission. In time, a dashboard to monitor cashflow will be included in the platform.

This form of financing does raise concerns about fraud. What if a company fabricates the numbers of the invoice they’re submitting to the platform?

Ang acknowledges this as a real issue. Their solution is to put both parties – the supplier and the buyer – on the platform. “We encourage them to exchange their invoices as a verification process. That way, at least you know that it’s a real invoice.”

Nufin Data regional business development head Joseph Seah notes that if NEMO manages to gain more users and “reach a critical mass”, the platform can function as its own ecosystem (“like Facebook”), creating a check and balance system among buyers and suppliers and weeding out bad users in the process.

“We can’t for certain prevent fraud – if both parties collude, the fraud can still happen. But this will mitigate some of the risks,” he says.