Australians have witnessed the birth of a service that allows them to access their payday ahead of time via an advancement, bypassing banks with a service striving to operate similar to payday lenders but with fewer fees and shorter repayment timeframes.
With several ‘pay advance’ companies popping up recently, it was only a matter of time before someone replicated the same service to assist enterprises and businesses in overcoming cash pressures and providing financing when needed.
Requiring fewer barriers to entry and quicker turnaround times, the appeal of the service is pretty clear when comparing how hard it is for a small business to access financing from traditional banks.
One of the new entrants into this space, specifically for small to medium-sized enterprises (SMEs) is ASX-listed Earlypay Ltd (ASX: EPY), which has released its full-year results today, highlighting its success within its core business and while holding back on providing an outlook for the year ahead.
Earlypay, formally known as CML Group, has achieved strong organic growth throughout FY22. Its operating margins have consistently improved in a show of scalability and efficiency within its business—clocking revenue at $53.8 million, which gained 23% over the previous-corresponding period (pcp). While also reporting an impressive total profit of $14.7 million, a sizeable increase of 69% from $8.7 million in FY21.
When utilising the service, Earlypay provides financing to SMEs at an interest rate between 5-10%, along with an administration fee of 1.5% on the funds drawn down. On average, each SME accesses $5 million in funding per year, but unlike traditional banks, the businesses don’t require a lengthy credit check and can bypass the usual process, which expedites the time it takes to access additional cash.
“With more and more SMEs looking for funding outside of the banks, Earlypay is clearly positioned as a leader and innovator in the small business finance sector. We anticipate a continuation of momentum through FY23 based on the current new business pipeline and favourable market conditions for the core invoice Finance Product,” said Earlypay CEO, Daniel Riley.
Customers can access invoice financing via Earlypay’s platform, where they can access up to 80% on their invoices for goods and services where there has been no payment received from the customer yet. Usually spanning 30 to 60 days, the flexible line of credit allows the business to overcome short-term cash pressures that otherwise would put their business under pressure.
Earlypay’s invoice and trade financing has achieved substantial growth throughout FY22, where they have recorded a total transaction volume (TTV) of $2.42 billion, up 30% from FY21.
“While it is too early to give specific guidance, Earlypay has had a strong start to the new financial year and expects an increase in earnings in FY23.”
Unlike Zip (ASX: ZIP), who also came out with its full-year results today, Earlypay hasn’t had its bottom line decimated by bad debts. Historically, the Company has recorded a loss rate on bad debts at a manageable <0.10%—compared to Zip writing off $276.1 million in bad debts and credit losses. Almost half of their revenue.
EPY shares haven’t seen much action this year, mainly tracking sideways from a low of $0.39 to a high of $0.57. Currently, shares are sitting at $0.48 at the time of writing.
Trading Desk Assistant at Emerald Financial
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