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Working capital provider Blackstar Capital has secured US$1bn in funding as part of an agreement aimed at boosting support for state contractors and subcontractors in the US, Europe and the Middle East.

Under the deal, Blackstar Capital will provide its data-driven receivables finance product to businesses in a range of government supply chains and is aiming for full capital deployment by mid-2025.

Blackstar declined to name the backer of the programme, but says funding is being supplied by a global institutional investor.

The initiative will help service SME prime contractors and subcontractors that may struggle to tap bank working capital financing and are acutely feeling the effects of high inflation and raised interest rates, Blackstar says.

“The idea behind this new initiative is that while governments are typically very good credits, there are inefficiencies in terms of how and when they pay. For an SME business that can be an existential issue,” Blackstar CEO, Mark Stephens, tells GTR.

“It is all very good and well knowing they will be paid at some point, but they don’t know when,” he adds.

“That’s not to say we wouldn’t extend finance to [large multinational companies], but there is a sweet spot that we’re aiming for in the market, where we think our offer resonates most.”

The financier has already begun outreach with companies that are engaged in, or bidding for, contracts related to reconstruction efforts being carried out by the US government’s Federal Emergency Management Agency (FEMA) after a series of wildfires devastated parts of Hawaii in early August.

“If you look at FEMA, all companies engaged with them have to be registered on the Disaster Response Registry in the US. There are over 88,000 firms registered and there is a lot of public domain information around contracts already issued, amounts, timings – we’ve downloaded 3 terabytes of data, which enables us to analyse and understand funding opportunities,” Stephens says.

Blackstar’s financing could back all manner of projects including those related to the reconstruction of roads, utilities, infrastructure, schools, and houses, he adds.

The working capital solutions provider is also eyeing business related to government contract invoices in Europe and the Middle East, Stephens says.

“We are closely looking at Saudi Arabia as well. We’re excited by the sheer volume of public expenditure happening in the Kingdom at the moment and there are clear working capital issues on the ground there.”

The announcement comes amid a wider push by the working capital firm to roll out its new data-driven receivables finance offering, Northstar, after closing a pilot of the product in the early months of 2023.

Last month, Blackstar revealed to GTR that the pilot had become a fully-fledged project that was being rolled out in partnership with three major platforms with an aggregated invoice value of over US$5tn per annum.

Within the pilot, onboarded suppliers uploaded invoices to a partner platform and the information was passed electronically on to Blackstar, which ran eligibility checks and, if the transaction was approved for funding, suppliers were paid within minutes via the Faster Payments service.

Blackstar claims to have deployed £101.8mn and funded over 55,000 invoices between 2021 and April this year, focusing on UK domestic suppliers.

Stephens says the average invoice value financed under Blackstar’s pilot was £2,000, yet he expects this figure to be far higher under the new government receivables financing programme.