The financial crisis in 2007/2008 has lead to stricter regulations for banks when it comes to lending. By implementing Basel III, regulators have hoped to mitigate the risk of another crisis, requiring banks to back their loans with more equity than before. This has lead to a restrictive funding environment for small and medium sized companies in Europe as those loans are financially less attractive for banks than before.
We believe that this financing gap, especially when it comes to short-term liquidity, can be closed by modern financing means such as factoring, asset-backed lending or fine trading, etc. Although those instruments are not new to the market, we believe that their performance can be enhanced with the support of technology. By bringing financing to a digital age, the different means of financing become more transparent. Credit risk scoring can be improved by adding new data sources and algorithms, leading to a faster and more resource efficient allocation of capital.
Two investments from our current portfolio in that space: