Stenn Financial, an invoice financing firm, has launched a US$300mn fund to tap the manufacturing hubs of emerging Asia that are “pretty much untouched by banks”.

The UK-based company, with an office in Singapore, has combined its own capital with that of alternative asset manager Crayhill Capital Management to launch a platform for acquiring 120-day trade receivables from SMEs in China and Southeast Asia.

The launch comes at a time when many traditional financial institutions are vacating the space as they de-risk their balance sheets and focus their resources on core sectors and geographies. The short-term funding is designed to free up capital for these manufacturers, typically in the consumer goods space, to continue meeting orders from large retailers in the west.

Stenn’s CEO Walter Colebatch tells GTR that despite many banks announcing supply chain financing programmes in Asia, they are encountering little competition on the ground.

“The feedback we are getting from our clients is that dealing with banks is time-consuming, inefficient, inflexible and bureaucratic for them. We only expect that to increase, and the differential between invoice financing firms like Stenn and the banks to increase,” he says.

Colebatch adds: “Secondly, while banks talk a good shop when they launch these programmes, we find the real-world marketplace on the ground in developing manufacturing nations is pretty much untouched by those banks. So in reality we are not bumping into them on the ground. We are not seeing them and our clients are not seeing them.”

The view reinforces that held by many alternative financiers in Asia. Speaking to GTR in Hong Kong this month, Rajah Chaudhry, the CEO of online working capital platform Paycelerate, explained that large banks find it difficult to cater for the granularity of Asian supply chains. Their programmes are often not scalable and destined only to work for large multinationals and their long-term, steady suppliers throughout the region. This leaves a gaping hole in the market for smaller companies requiring access to working capital.

Colebatch explains: “The cashflow shortages and withdrawal of liquidity in the Asian manufacturing countries of the past 12 months or so has seen interest in our services grow significantly. It’s an excellent opportunity for us because while that is happening in Asia, on the other side of the world, importers and retailers are reacting by demanding longer open-account terms or cutting their LC issuances in order to preserve their own working capital.”

The company is developing its client base on both sides of the transaction: working with buyers, who have more influence in the bilateral transactional relationship, but forging a contractual relationship with suppliers, since they are the party requiring the finance.

“Our experience is that once we are working with an existing bilateral relationship, the buyers want to roll us out to all of their other suppliers, and the suppliers want to roll us out to all their other buyers, so both ends are important for us,” Colebatch says.

An office in Hong Kong or Mainland China is in the offing sometime early in 2017, with the founder of Crayhill, the asset manager providing financial backing, pointing to the potential size of the market as a reason for investing in the initiative.

Josh Eaton says: “We were attracted to Stenn by the size of the market for this type of financing, the deep expertise of the management team, the quality of their network of buyers and counterparties, and a scalable origination and servicing platform.”