For small and medium-sized businesses in developing markets around the world, selling to large Western customers can be transformative, allowing them to grow rapidly and create new wealth. But to meet the demands of large buyers with challenging supply chain requirements, these SMEs need access to finance – many are missing out on trade opportunities as a result, with some estimates putting the trade finance gap at 1, 7 trillion dollars.
Trade finance specialist Twinco Capital aims to help solve this problem. And the Amsterdam and Madrid-based fintech startup is today announcing a $12 million funding round that it hopes will give it the firepower to support more SMEs bidding for contracts. lucrative in the clothing industry.
Sandra Nolasco, CEO and co-founder of the company with COO Carmen Marín, says her approach to trade finance is unique. “We are the very first company to offer a global supply chain finance solution that begins financing at the very beginning of the production cycle,” she explains. “We do it globally for small and large suppliers.”
Sourcing trade finance has traditionally operated on a different model. A supplier getting a $100,000 order from a large retailer would fulfill the order and then invoice the customer; to improve its financing, it could then borrow from an invoice financing provider against the value of that invoice, rather than having to wait for the customer to pay its invoice.
In contrast, Twinco offers capital at the time the retailer places the order. Nolasco points out that many small businesses do not have sufficient funds to source raw materials and guarantee production capacity for the size of order a large international retailer might place. Twinco’s capital can therefore guarantee that the SME does not miss out on such business because the lack of financing prevents it from honoring an order.
Concretely, a Bangladeshi t-shirt manufacturer, for example, receiving an order of $100,000 from a high-street European retailer, could apply to Twinco for $60,000 in financing. The capital would allow the manufacturer to fulfill the contract, with Twinco getting its money back once the order has been fulfilled and the invoice paid.
“We want SMEs in all markets to be able to participate in global trade,” says Nolasco. “Lack of access to finance is a major challenge against that, so that’s where we’ve focused.”
Twinco works directly with Western retailers; they share details of their suppliers with the company, as well as data on each supplier’s performance in the past – whether they delivered orders on time and with the right quality, for example. Twinco’s systems then analyze this data to assess the creditworthiness of suppliers, enabling it to offer financing at an early stage in the business process.
It is a model that appeals to both buyers and suppliers. The former take no credit risk and work with a wide range of suppliers; Twinco’s systems also collect a rich set of data on suppliers’ business, financial and sustainability performance, which helps retailers ensure supply chain transparency. They get the financing they need to win bigger contracts and support their growth.
Since its launch in 2019, Twinco has grown rapidly. It now works with five major apparel retailers and over 100 suppliers based in 12 countries, including Bangladesh, China, Pakistan, South Korea, Turkey, Thailand, Vietnam and Indonesia. So far, it has provided these suppliers with $150 million in financial support.
Nolasco is ambitious for the future of Twinco, considering opportunities to increase its influence with its existing customer base but also to go further. “We want to change the fashion industry first, but we can also make a difference in other sectors,” she explains. As obvious examples of industries where big players in developed markets work with extended supply chains of smaller companies around the world, automotive and electronics are potential next steps for the company.
Today’s round table should enable Twinco to pursue its ambitions more aggressively. The $12 million equity and debt round is led by Quona Capital, with participation from the Working Capital Innovation Fund and existing investors such as Mundi Ventures and Finch Capital. “Twinco is focused on a massive and underpenetrated market pain point that is supply chain finance,” said Monica Brand Engel, co-founder and managing partner of Quona.
The funding will be used to accelerate Twinco’s expansion into key markets that Western retailers tend to source from, as well as to build its technology and data capabilities, particularly with respect to environmental, social and governance (ESG). Twinco also expects to complete a $100 million credit facility during the first quarter of the year.