Wellington start-up offering cash-flow product to SMEs via Xero

Fuelled chief executive Trent Fulcher

Xero's Anna Curzon says the banks will be watching its new lending partner "with interest."

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Wellington-based Fuelled is offering small businesses a quick way out of their cash flow difficulties in a partnership with accounting software firm Xero [NZX: XRO].

The partnership was announced today at Xerocon, Xero's annual rock-n-roll style get-together for its accountant and book-keeper customers, which has attracted 2,300 people this year in Brisbane.

Fuelled has been trialling the on-demand cash flow solution, only available through Xero, for the past 18 months with 25 customers in New Zealand, The average loan size was just $3,500.

Xero has 186,000 customers in New Zealand and 312,000 in Australia. Fuelled is aiming to hit $16 million in invoices in New Zealand and $260 million in Australia. Xero already has a similar lending partnership with Moula which operates just in Australia.

Fuelled chief executive Trent Fulcher said he saw a cash-flow gap for small businesses while in his previous role as head of strategy for Kiwibank, which doesn't offer this type of financing. Short-term cash flow constraints are one of the biggest problems for small businesses when big corporate customers pay late or they have to take on new staff to deal with additional business before they get paid. Existing solutions often require owners to put their house or other assets up for security, he said.

Fuelled offers short-term loans - the small business equivalent of payday loans - secured against unpaid invoices. "By funding invoices in advance, Fuelled helps companies to align their expenditures and income in a way that won't leave them caught short by a lack of working capital," Fulcher said.

It has developed detailed risk analysis that's not available to the banks except on an annual basis, through the real-time financial information held on each company within the Xero platform. The loan interest rate is between 9 to 15 percent depending on size and risk profile, along with a transaction fee on top of 4 percent to 4.5 percent, which is on par with what banks would charge.

Fuelled has lent out $1 million so far in the pilot, with the funds provided by Auckland-based leasing, rental, and finance provider, Advaro, which is owned by Maui Capital. Fulcher said Advaro had sufficient funding to provide loans of up to $35 million but he was also in discussions with two New Zealand banks, including Heartland, about future funding and/or equity injections in the start-up.

Fulcher said they have decided to initially start in Australasia and then expand to Asia rather than the US or the UK, which are already well-catered for with cash flow lending options.

Fuelled is majority owned by Fulcher and his co-founder Tapio Sorsa, with the rest held by the other four staff members.

Fulcher said the aim is to grow it to a $100 million business within five years.


(Fiona Rotherham travelled to Xerocon courtesy of Xero)

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