Startups too small for traditional banks, VCs could access financing from restructured eCapital Corp

14-Apr-2021 - Last updated on 14-Apr-2021 at 13:19 GMT

Source: Getty/ Tinnakorn Jorruang

With the consolidation of eight businesses under one simplified corporate structure and a strong track record of driving growth despite pandemic-related challenges, specialty lender eCapital Corp. is poised to offer upwards of 25% more financing this year than last to fast-growing startups in industries “essential to everyday life,” including food, beverage & health.

“We have provided over $4bn in financing to [about 4,000 small and medium enterprises] in 2020 alone, and we are expected to provide over $5bn in financing to our clients this year,” including SMEs that may be too small for traditional bank loans and equity investors, eCapital Corp. CEO Marius Silvasan told FoodNavigator-USA.

He explained that by helping startups making up to $100m in sales per year access capital ranging from $50,000 to $2m, eCapital Corp. is filling a “void” created during the financial crisis when traditional banks began limiting the financing they offer to SMEs to “de-risk themselves.”

This left startups with limited options – especially as venture capital funds playing in the food and beverage space increasingly look to invest in more mature businesses with a proof of concept, higher sales track record and more promising returns.

Aggressive acquisition strategy allows eCapital to offer more

eCapital Corp. is able to offer more financing to SMEs in part because of its successful organic growth paired with an aggressive acquisition strategy in recent years, Silvasan said.

He noted eCapital’s shopping spree began in 2017 with Gerber Finance, “which is quite active in the food and beverage space as well as the wellness space,” followed by Paragon Financial Group in 2018. Over the next two years, eCapital acquired six other key players that enhanced the company’s internal and customer facing technology capabilities, customer base and international footprint.

Together, these companies give eCapital an efficiency that is necessary to handle the increased volume of transactions between SMEs and lenders, bring on new businesses and still manage risk for its stockholders, Silvasan explained.

A streamlined approach

To further maximize the potential of these businesses under eCapital, Silvasan said the company is now consolidated around three divisions that offer two primary services.

“One of our key products is the purchase of receivables from our clients … to provide immediate liquidity which they can use to buy new products and effectively sell more to their clients,” he explained, noting this business is further divided into two silos – eCapital Commercial Finance and eCapital Freight Factoring.

The second key product is the asset-based lending division, led by Gerber Finance, that help SMEs finance inventory purchases by leveraging accounts receivable and inventory assets, he noted.

The restructuring not only will allow eCapital to help more SMEs level up with hard to find funding during awkward growth stages, it will lay the ground work for the lender to tuck in additional bolt-on acquisitions as the specialty lending space continues to consolidate.

“We are hopeful we will be able to complete some transactions this year,” Silvasan said. “Our goal is to emerge as a recognizable brand in the marketplace over the next few years as the industry consolidates.”