Payments fintech Butn has raised $12.5 million in funding ahead of an IPO planned for the second half of this year, for its tech tapping into the pay-on-demand trend in the B2B space.
At the same time, it’s finalised a partnership with food delivery platform Easi, to give drivers and riders the option to receive their pay through the platform on the same day.
Headed up by co-chiefs Rael Ross and Walter Rapoport, Butn facilitates advances on payments for small businesses, through a suite of products offering advances on things such as commissions and invoice payments, through an integrated platform in their existing CRM.
The business is designed to solve cashflow challenges for small businesses, including sole traders, for a set per-transaction fee.
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The partnership with Easi, for example, gives both delivery riders and restaurants the option to receive their pay through the platform on the same day.
Speaking to SmartCompany, Ross doesn’t share exactly what the fee structure looks like, but he does say the model is “low-margin, high-volume”.
He would rather do a million transactions with a very small fee than 100 at a larger fee, he says. After all, he has to keep businesses on board as repeat customers.
This latest funding round was led by Canaccord Genuity, and also includes backing from Wilsons Asset Management and Regal Funds.
Primarily, the capital is pegged for product development and building out the tech.
Ross also sees this as the right time to really scale the product, and tap into an under-served business-to-business market.
“The market understands digital distribution, thanks to the likes of Afterpay and Zip in the B2C space,” he explains.
“But no-one is doing it in the B2B space. Now we’ve captured that market.”
And the businesses is growing. During the 2020 financial year, the startup facilitated about $166.6 million in lending, up from $105.4 million in the previous 12 months.
Butn is “one of Australia’s largest B2B transactional funders”, Ross says. And he only sees demand for the platform growing.
There’s an increasing desire for flexibility month small business owners, he says.
And for contractors or sole traders, many of whom are on temporary visas, or may not have a regular income, traditional lenders are not a viable option.
Ross asks: “Who’s going to lend to them?”
Ross stresses that loans are based on pre-existing transactions, and based on a case-by-case basis. That’s where it takes the competition to traditional loans.
It’s not about funding wages, he says. It’s about treating sole traders and contractors as businesses, and offering them access to capital as such.
In the past, buy-now-pay-later and pay-on-demand startups have attracted criticism, and suggestions that they may not have the customers’ best interests at heart.
Comparisons have been made with predatory payday loan providers, and questions raised about the size of fees.
Ross stresses, again, that Butn doesn’t lend to consumers. The product is designed for businesses that have already delivered a product or service and are simply waiting for their payments.
“We don’t lend money. We facilitate payments within transactions,” the founder says.
“The real crux of the matter is these guys now have instant access to cashflow.”