Oftentimes, when a cross-border ecommerce company ships an order overseas, it may be multiple weeks (if not months) until the buyer pays for it. While some companies may have enough funds to continue operating while they wait for the payment, that’s not always the case. Some companies may need a little help bridging the gap.
Ping An Digital Bank is looking out for these companies with a brand-new purchase-order financing product. It gives eligible businesses up to 95% of accounts receivable, up to a total of $5 million, and provides the money very quickly, all without the need for traditional collateral.
Ping An Digital Bank Offers Ecommerce Financing Up To $5 Million
Ping An Digital Bank, a virtual bank based in Hong Kong that’s dedicated to SMEs, has just announced a new product aimed at helping cross-border ecommerce companies get access to the funding they need and to better support their international expansion.
The bank said that eligible businesses can get financing up to 95% of their accounts receivable, can borrow up to $5 million, and enjoy repayment periods of up to 120 days. Not only that, but the bank also said that approval and drawdown can be completed in as little as one business day after applying.
While it’s possible to start an ecommerce business with no money, you’ll eventually need funds to operate. Financing like what Ping An Digital Bank is offering can bridge the gap between paying suppliers/shipping out products overseas and receiving funds from the end customer.
Some larger companies can handle this gap, but many smaller businesses have an especially hard time with it, especially if settlement cycles are long.
How it Works
The way the product works is fairly simple, but it operates differently than many other types of financing. Instead of demanding collateral or looking at financial statements, Ping An Digital Bank uses real-time sales information from cross-border buyers, as well as trade and financial data, to assess credit.
The product is designed for export-focused companies that sell on open-account terms, where goods are delivered before payments are due. According to the bank, the product also combines credit insurance and risk-management measures.
Businesses can apply for this financing by using verified and eligible invoices, but Ping An Digital Bank didn’t disclose pricing, revenue requirements, which ecommerce platforms are supported, which buyer markets are eligible, or what determines if an invoice qualifies.
It also didn’t state how much capital has been allocated to the product or how many companies have tested it.
Speaking about the new product, Chief Business Officer of Ping An Digital Bank, Thomas Tung, said that “By harnessing years of experience in exploring the potential of commercial data, and combining multidimensional data spanning trade and finance, we have redefined the credit assessment process to effectively resolve financing bottlenecks for businesses.
He also added that “The launch of Purchase Order Financing seamlessly integrates credit insurance with risk management, providing cross-border e-commerce merchants with more efficient and flexible liquidity support.”
Our Take
Setting a High Standard For Lenders
While there’s not a ton of details about eligibility, requirements, or pricing, this looks like a strong option for small cross-border sellers on the surface. If the rest of the terms end up being friendly, it sets a high standard for lenders around the world.
If sellers from other countries and regions see the friendly terms that Ping An Digital Bank is offering, it may lead to them also expecting similar approval speed and terms from financial institutions in their area.
It’ll be interesting to see if other lenders around the world feel the need to compete with the offer and upgrade their services in response. Many fintechs and banks in the USA, Europe, and beyond often feel pressure to match foreign digital banking innovations, so this new product has the potential to lead to a major change in the space.
