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COVID19: Fintech helping businesses cope with virus

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By Athos Kyranides

As businesses resume operations after a near two-month freeze, the majority are likely to turn to fintech companies for solutions to help operations get back to normal as soon as possible and prepare for possible new restrictions come autumn when Covid-19 may resurface.

The order to shut down operations or force employees to work from home has affected almost all sectors of the economy and increased the number of unemployed.

The negative impact on national economies is devastating with almost all economies in the world likely to register steep decline inactivity.

Covid-19 has become the new dreaded word, forcing many companies to change and adapt to survive or face the bleak choice of bankruptcy.

One sector that is helping find solutions for businesses, both big and small, is fintech, offering relatively low-cost digital services in a number of ways.

IT systems – remote access

Almost every company, no matter how well prepared, has found problems in functionality with respect to forcing employees to work from home, which requires new investment in IT and technology to be able to function in the new working environment.

Covid-19 is forcing businesses to accelerate the shift to cloud services.

Screen sharing apps and remote access software are now much in demand as businesses realise that work-from-home may soon be the norm rather than the exception to how businesses operate.

Travel restrictions

One direct casualty of Covid-19 is the travel industry with the impact on international movement and trade likely to be severe which will force many companies to default and shut down operations.

The airline, hotel, tourism, and travel industries will need to change and adapt, otherwise, close down.

Social distancing will have a profound impact on the hospitality and entertainment sectors.

Short-term solutions are likely to be found as we enter the summer season so customers will be served outdoors, but challenges will emerge in winter.

Supply chain

Interruptions are coming in global and regional supply chains, which will force businesses to demand fintechs to offer solutions from logistics to sales.

The rush to go digital in all aspects of operations will be felt in all sectors starting from e-invoicing, forwarding, shipping, warehousing, transport, insurance to payment processing.

Financing

Another area that fintechs are already providing excellent service is invoice financing which goes a long way to solve company liquidity and cash flow issues, also reducing business risk.

One example of a local invoice financing company is Eurivex Trade Finance (http://www.eurivexfinance.com/) which offers SMEs dealing in local and international trade funding and credit insurance on their trade receivables for immediate cash and liquidity.

Since the majority of companies offer their services or goods on credit and lack the liquidity to self-finance their operations, including settling supplier balances, such companies, big or small can sell those invoices to a fintech at a small discount rate and receive immediate cash.

This way, the business gains immediate access to funds so that it can settle supplier outstanding’s and pay for ordinary expenses, without the need for the business owners to give personal guarantees and pledge tangible assets as collateral.

The only collateral is the invoice assigned to the fintech providing alternative financing solutions.

When the invoice is paid, a fintech such as Eurivex Trade Finance will receive the money, its agreed fees and transfer the remaining balance to the business.

This service is much faster than what a traditional bank would offer.

The beauty of this service is that a business can assign all its sales ledger or select individually the trade receivables that it wishes to pass for financing.

Reduced risk

By assigning the credit invoices to a fintech such as Eurivex Trade Finance providing factoring and invoice discounting solutions, businesses can also secure credit insurance on their customers and reduce their business risk from the possible default of one or more large trade receivables.

Covid-19 has proved that everybody is at risk and the idea that a global company or a well-known customer cannot go bankrupt is absurd.

The old way of offering goods and services on credit to a customer simply because of a long-term relationship without covering the risk is very dangerous.

Solutions from immediate cash without personal guarantees or mortgaging assets and to credit insurance to cover the risk of default is all being offered right now, which will allow a business to invest in new technology and systems to overcome negative effects of Covid-19 for now and the future.

The writer is Head of Trade Finance Operations at Eurivex Trade Finance