Velotrade, the first Account Receivables Financing Platform in Hong Kong to obtain a Type 1 Regulated Activity licence by the Securities and Futures Commission, is now ready to provide institutions with access to new investment opportunities in this steadily developing alternative asset class.
Since commencing operations in 2017, Velotrade has handled cross-border financing deals in Hong Kong, China, Singapore, Taiwan and Vietnam with automotive; electronics manufacturing; brand name supermarket chains; and leading garment industry players. Now the company is set to deliver Receivables Financing solutions for increasingly large scale local and international transactions, backed by the reassurance provided by Hong Kong SFC approval.
“Previously, internal risk management rules would prevent many institutions from investing in Account Receivables, but our SFC licence means they can now benefit fully from Velotrade’s access to an alternative asset class that provides them with a further portfolio diversification opportunity. As a direct result, Velotrade is looking forward to a period of rapid expansion.” points out Vittorio De Angelis, Executive Chairman of Velotrade
Account Receivables Financing has seen growing appeal as one of a range of alternative assets available to investors looking for better returns in the low interest rate environment since the 2008 global financial crisis. Offering a high degree of reliability, strong yield and low correlation to equities, investment in Account Receivables has gradually developed in popularity among institutions in the major financial markets.
Hand-in-hand with growth in demand from investors, Velotrade is also seeing a rising level of demand among enterprises of all sizes which need a channel to sell their invoices in order to finance day-to-day business activity. According to an Asian Development Bank report, banks and other traditional financial institutions have shown a growing reluctance to provide trade finance to small and medium size businesses because of the complexity of anti-financial crime due diligence and the perception of low returns on financial support from smaller firms. As a result, the global trade finance gap was reported to be as much as USD 1.5 trillion in 2017.
The recognition of virtual banks by the HKMA (Hong Kong Monetary Authority) and the establishment of E-Trade Connect, a Trade Finance Blockchain-based platform – initially intended for traditional banks and soon afterwards for alternative players like Velotrade. Moreover, regulators have accepted the importance of the role Fintech is playing and the SFC’s regulation of Velotrade’s online platform is further confirmation of this trend.
Velotrade enables corporates of all sizes to meet their cash flow needs by more rapidly monetizing unpaid invoices. Qualifying companies upload their outstanding bills that they need to turn to cash onto Velotrade’s online platform where approved investors bid on individual invoices. Once the bidding process is complete, the invoice seller receives immediate payment of typically 80%, minus platform costs, with the balance payable once the debtor makes the final settlement, less a yield to investors.
Featured image credit: Unsplash
