For SMEs in emerging 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 up to 1.7 trillion dollars.
Trade finance specialist Twinco Capital aims to help tackle this problem. And the fintech startup, based in Amsterdam and Madrid, is today announcing a $12 million funding round that it hopes will give it the firepower to support more SMEs bidding for lucrative contracts in the apparel sector.
Sandra Nolasco, CEO and co-founder of the business with COO Carmen Marin, says its approach to trade finance is unique. “We are the first company to offer a global supply chain financing solution that starts financing at the very beginning of the production cycle,” she explains. “We do this on a global basis for both small and large suppliers.”
Trade financing of supply has traditionally worked on a different model. A supplier securing a $100,000 order from a large retailer would fulfill the order and then invoice the customer; to improve its financing, it can then borrow from an invoice finance provider against the value of that invoice, rather than having to wait for the customer to pay its bill.
In contrast, Twinco offers equity the moment the retailer places the order. Nolasco points out that many small businesses do not have sufficient funding to procure raw materials and provide production capacity for the size of an order that a large international retailer might place. Therefore, Twinco’s capital can ensure that the SME does not miss out on such business because the lack of funding prevents it from fulfilling an order.
In practice, a T-shirt manufacturer from Bangladesh, say, receiving a $100,000 order from a European retailer, might ask Twinco for $60,000 in financing. The capital will allow the manufacturer to fulfill the contract, with Twinco getting its money back once the order is fulfilled and the bill is paid.
“We want SMEs in every market to be able to participate in global trade,” explains Nolasco. “Lack of access to finance is a key challenge preventing this, 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 how each supplier has performed in the past – whether they delivered orders on time and at the right quality, for example. Twinco’s systems then analyze this data to assess the creditworthiness of suppliers, allowing it to offer financing earlier in the trade process.
It’s a model that appeals to buyers and suppliers alike. The first do not take credit risk and work with a wide range of suppliers; Twinco’s systems also collect a rich set of data on the commercial, financial and sustainability of suppliers, which helps retailers provide supply chain transparency. The latter receive the necessary funding to enter into larger contracts and support their growth.
Since its launch in 2019, Twinco has grown rapidly. It now works with five major clothing retailers and more than 100 suppliers based in 12 countries, including Bangladesh, China, Pakistan, South Korea, Turkey, Thailand, Vietnam and Indonesia. So far, it has provided these providers with $150 million in financial support.
Nolasco is ambitious about Twinco’s future, looking at 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 make a difference in other sectors as well,” she explains. As obvious examples of industries where major players in developed markets operate with extended supply chains to smaller firms around the world, automotive and electronics are potential next steps for the company.
Today’s funding round should allow Twinco to pursue its ambitions more aggressively. The $12 million equity and debt round was led by Quona Capital, with participation from Working Capital Innovation Fund and existing investors such as Mundi Ventures and Finch Capital. “Twinco focuses on a significant pain point in the massive and underpenetrated market that is supply chain finance,” said Monica Brand Engel, co-founder and managing partner at 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 strengthen its technology and information capabilities, particularly in environmental, social and governance (ESG) data. . Twinco also plans to negotiate a $100 million debt facility in the first quarter of the year.