Access to finance is one of the biggest obstacles to business growth for small and medium enterprises (SMEs), according to the World Bank. The global trade finance gap is estimated to have increased to $1.7 trillion in 2020 from $1.5 trillion in 2018, due in part to the COVID-19 pandemic.

Fintech startups see that gap as a business opportunity. Among them is Modifi, a digital trade finance platform for business payments and trade management software. It steps in to help SMEs pay their sellers instantly while giving them the option to pay later, according to Ankit Goel, Modifi’s senior vice-president of global accounts.

“SMEs struggle to open lines of credit but are required to pay suppliers fast, which can leave an SME strapped for cash after it delivers goods if it isn’t paid immediately. This is where fintech companies and cross-border trade management platforms like Modifi come into play,” he said.

Modifi claims to serve thousands of exporters and importers across more than 40 countries. It is headquartered in Berlin but has offices in the US, the UAE, India, Bangladesh and China.

“The company has grown four times year-on-year, with recent launches in Pakistan and the UK in addition to our eight existing markets,” added Goel, who is based in the UAE.

Meeting a Dire Need

There certainly seems to be substantial demand for Modifi’s services. In India alone, for example, the startup has seen its business grow more than 2,100% over the past two years. In January, it announced the acquisition of UK-based Seawise Capital’s trade finance and SaaS India business, improving access to global trade for Indian SMEs.

In the Middle East, the company has focused on partnerships to grow its market share. In May, DP World teamed up with Modifi to use its Cargoes Finance fintech platform, giving the Emirati logistics behemoth’s SME customers access to working capital. The previous month, Modifi partnered with B2B MENA marketplace Tradeling, giving buyers favourable payment terms for 30, 60 or 90 days while enabling them to pay suppliers early.

Modifi’s most recent market valuation was estimated at over $120 million, determined on the back of a $24-million Series B funding round in September 2021. In December, the company announced a further $145 million in debt financing.

“We offer trade finance and other export solutions to SMEs at a low cost,” Goel explained. “We have a better understanding of the risk for SMEs due to access to numerous data sources and can therefore not only vet and confirm the legitimacy of the buyer but also ensure the payment of the invoice, even if the buyers were to go bankrupt. This eliminates credit risks that often prevent sellers from offering more favourable contract terms to buyers.”

Elaborating on how the startup manages the risk involved in paying sellers when buyers have yet to pay for goods provided, he explained: “Modifi enables its client to allow [its] customers the usual time for payment while obtaining the invoice amounts in cash immediately as it purchases the client’s receivables and makes advance payments to the client. Modifi insures the risk of non-receipt of the receivables from the customer with trade credit insurance. In addition, it holds some invoice amount as collateral to cover itself from the credit risk.”

Ambitious Goals

The company is now working to further increase confidence in SMEs by providing transparency in trade flows.

In June, Modifi unveiled a free shipment tracking tool so any business can trace and manage shipments on a single platform. “The shipment tracking tool is the first of many trade services to come, as we’ll be introducing many more software solutions to help our users optimise their supply chains,” Goel said.

The company hopes to maintain its stellar growth rate as it continues expanding into new markets. “All in all, we are still very early in the game. There is a big need for our services, and our markets are huge. Even a 1% market share in global commerce could equate to $200 billion worth of trade being processed through Modifi. That is our long-term goal.”

(Reporting by Keith J. Fernandez; editing by Seban Scaria)