Nathan Fox is Head of Working Capital, UK for Payoneer.
Payoneer is the market leading payment solution for ecommerce sellers
How are your ecommerce clients getting on?
Payoneer covers a spectrum of ecommerce sellers in locations.
In the UK and Europe, a lot of sellers in certain categories have been doing quite well.
Essentials, health things, baby products have done well.
Those dealing in electronics or other goods made outside UK have seen a downturn in sales since start Jan.
Defining working capital
For Payoneer, they see working capital as an important pillar for an ecommerce seller.
“Working capital” meaning Net assets minus net liabilities.
Day-to-day running of the business.
It’s mostly cash, but could be inventory or accounts receivable.
Positive cashflow means you should have strong working capital.
Why working capital matters for eCommerce
Nathan has realized how important working capital is for sellers.
Initially it was just for buying inventory and making more revenue and more profit.
But they’ve seen that businesses use it to cover overheads or taxes.
Or emergency machinery breakdown.
Are these issues not addressed by mainstream banks?
It’s everyone’s first option.
The banks have changed a lot esp. since the financial crisis. They are not usually as open to talking to eCommerce sellers.
Loans may not so easily available in e-commerce?
They normally need a personal guarantee as well.
What Payoneer offers as working capital
- Working capital product is not a “loan” per se but it’s a purchase of future receivables
- Then that’s how they get paid.
It’s based on average monthly sales based on about 6 months’ trends.
Eg receive $50K/mo from Amazon Selling a year
There are no Personal Guarantees or credit checks.
There is no APR, interest, just a fixed fee eg 2.5% for £10,500
Why sellers might borrow money
Sellers might Want to buy more stock or do more advertising
Have API with amazon, can see 6 months’ sales history
If it’s consistent, can advance up to 100% of that.
No term loan limit
Generally, Payoneer takes 30% of your earnings back until the loan is paid back.
Sometimes sellers’ sales have dropped below a certain amount and after about 9 months, they might have to find alternative repayment agreement.
- No credit checks
- No personal guarantees
Mitigate risk by analysing store performance
- Hence API access (via MWS token)
- 6 months’ worth of sales data
- Order defect rate, pre fulfilment cancellation rate etc.
- Need to have been on the marketplace for min. 12 months
- Hit certain criteria – last 6 months’ amazon receivables
Cost of loans
- Intro fee 2.5% flat fee of amount taken
- Eg $50K cost $1250
- Future loans – Fee same at the moment
Paypal working cap around 5%
What is the purpose of this?
- Help with short-term capital requirements
- Advertising – it’s very important to advertise on Amazon to get on the First page
- Plus getting on Facebook etc. can be a key area where people use working capital to get themselves
Are you seeing big issues with repayments of loans?
Not seeing many defaults – won’t see full impact of it until everything has calmed down a bit.
People are more planning about how they might survive when we’ve come out of this.
The strong businesses and that have contingencies will survive.
There will be some luck.
Some people have had to turn to alternative logistics suppliers as FBA has shut down.
If you’re adaptable, you’ll do okay.
It may be the business model has to change eg Deliveroo has changed to no contact delivery.
There may be less of a reliance on the Far East to manufacture.
Closing borders might lead to local sourcing.
Managing cashflow in this time for ecommerce
Try not to make impulse decisions you can’t change down the line.
Make logical decisions rather than irrational ones.
Plan for the next several months.
Try to find partners that make things reliable
Payoneer is on the ground in the ecommerce market – 3 offices in Europe – and very tied in with various logistics companies.
Nathan is happy to talk to people for a formal introduction.
Watch my full interview with Nathan Fox
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