BOSTON, Jan. 30, 2024 /PRNewswire/ — Lendica, an embedded AI lending company, and CSG Forte, a CSG® (NASDAQ: CSGS) company and a leader in complete and customizable digital payments, announce a strategic partnership to deliver an embedded business credit solution to small and medium sized US companies.
Lendica and CSG Forte’s offering, called the iBranch, is an embedded financing service that enables SMBs to borrow money from their software vendors instead of traditional financial institutions.
Embedded lending, popularized by software companies such as Amazon, Shopify, and Square, has become a growing source of credit made available to small businesses. It is estimated that embedded business loan origination is growing at roughly 125% year over year and will hit an annual $500bn origination by 2030.
CSG Forte is partnering with Lendica, a leader in embedded lending solutions, to bring the solution to its Independent Software Vendor (ISV) partners and their merchants.
“Traditional small business credit is very expensive with the average borrower paying 61% APR.” shares Jared Shulman, CFA, Lendica’s CEO/Co-founder. “Our embedded lending programs, when implemented effectively, dramatically lowers rates to our customers by leveraging private datasets for more effective underwriting and better sales channels to cut customer acquisition costs.”
Jerry Shu, the company’s CTO/Co-founder, adds that the power of AI-driven credit underwriting shines with rich, embedded datasets that banks and non-bank lenders struggle to process.
The benefits of embedding lending extend beyond happier and healthier borrowers. ISVs benefit as well, earning a portion of the fee revenue generated from their embedded lending program and experience enhanced customer loyalty.
Through this partnership, CSG Forte’s diverse range of ISV partners and their merchants, including those in industries like field services and property management, can benefit from an innovative, embedded lending experience. For example, property management merchants may leverage this easy-to-use solution to access capital for building repairs and needed supplies or to engage in professional services to promote their business. The easy access to affordable capital empowers merchants and elevates their potential for future growth.
Welcome to the Lendica Glossary. This comprehensive guide helps to explain key financial terms and concepts relevant to embedded lending and business financing. Whether you’re a small business owner, CFO, or financial enthusiast, this glossary will help you understand essential terms and how they apply to your financial operations.
Terms
2/10 Net 30
A payment term offering a 2% discount if an invoice is paid within 10 days; otherwise, the full amount is due in 30 days. This incentivizes early payment and improves cash flow.
Money owed by a business to its suppliers for goods or services received but not yet paid for. Managing A/P effectively is crucial for maintaining good supplier relationships and ensuring the business has adequate cash flow and operational liquidity.
Accounts Receivable
Money owed to a business by its customers for goods or services provided but not yet paid for. Managing A/R effectively is crucial for maintaining cash flow and operational liquidity.
Days Inventory Outstanding (DIO)
Measures the average number of days inventory is held before it is sold.
Example Formula:
If a company has an average inventory of $50,000 and a COGS of $200,000, the DIO would be 50,000/200,000 x 365 = 91.25 days.
Days Payables Outstanding (DPO)
Measures the average number of days a company takes to pay its suppliers.
Example Formula:
If a company has accounts payable of $30,000 and a COGS of $200,000, the DPO would be 30,000/200,000 x 365 = 54.75 days.
Days Sales Outstanding (DSO)
Measures the average number of days it takes to collect payment after a sale.
Example Formula: If a company has accounts receivable of $25,000 and total credit sales of $150,000, the DSO would be 25,000/150,000 x 365 = 60.83 days.
Embedded Lending
A financial service integrated within a software platform, enabling users to access credit seamlessly. It simplifies the borrowing process and enhances user experience by providing financial services within existing workflows.
Enterprise Value
Enterprise Value (EV) is a measure of a company’s total value, often used as a more comprehensive alternative to market capitalization. It includes the market cap, debt, minority interest, and preferred shares, minus total cash and cash equivalents. EV is useful in assessing the value of a business for potential acquisition.
Example Formula:
Enterprise Value = Market Capitalization + Total Debt + Preferred Shares + Minority Interest – Cash and Cash Equivalents
For instance, if a company has a market cap of $50 million, total debt of $10 million, and $5 million in cash, its EV would be $55 million.
ERP Integration
The process of connecting a company’s Enterprise Resource Planning (ERP) system with other applications to streamline operations and ensure consistent data flow. It improves efficiency and accuracy in financial management.
Factoring
A financial transaction where a business sells its accounts receivable to a third party at a discount to receive immediate cash. This helps businesses manage cash flow and reduce credit risk.
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A factor rate is a fixed multiplier used to determine the total repayment amount in a merchant cash advance or factoring agreement. Unlike traditional interest rates, factor rates are expressed as a decimal figure, typically ranging from 1.1 to 1.5. The total repayment amount is calculated by multiplying the advance amount by the factor rate.
Example Formula:
Total Repayment Amount = Advance Amount × Factor Rate
For instance, if the advance amount is $10,000 and the factor rate is 1.2, the total repayment would be $12,000.
Reverse Factoring
A financial arrangement where a third party finances a company’s suppliers, allowing the suppliers to get paid early while the company pays the third party later. It enhances supplier relationships and improves cash flow management.
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Additional fees that a service provider applies for processing smaller invoices or bills, typically to cover administrative or processing costs. These charges are often implemented to ensure that even smaller transactions remain cost-effective for the business providing the service.
Vertical SaaS
Vertical SaaS is software designed specifically for the needs of a particular industry or niche, such as healthcare or finance. It provides specialized features and solutions tailored to the unique challenges of that sector.
Working Capital
The difference between a company’s current assets and current liabilities, representing the liquidity available for day-to-day operations. Effective management of working capital is essential for maintaining business solvency.
Example Formula:
Working Capital = Current Assets – Current Liabilities
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