Raistone Capital is a financial technology firm specifically geared towards “democratizing access to working capital” for small and medium enterprises. In 2017, the company was incubated within a full-service investment bank and broker dealer trading over $100 billion per year with over 3,000 active investor trading counterparties.
Shortly thereafter, it spun out into an independent company and it is jointly owned by the broker dealer, a $30BN+ family office and the world’s largest wealth management company. Raistone has grown by 300% per annum for the last three years and having completed a Series B capital raise, is on track to continue that momentum, according to Dave Skirzenski, Founder and CEO, Raistone Capital. Skirzenski has over twenty years of experience in financing supply chains.
As Inside Towers has reported, the telecom industry has struggled with extended payment terms. “Large corporates are extending their payment terms 30, 60, 90, 180, even 270 days, not because they want to be bad citizens but because they’re measured in the capital markets based on the efficiency of their cash conversion cycle,” explains Skirzenski.
Raistone has a specialty in providing low-cost receivable finance for the telecom industry. It works with the supply chains of the leading telecoms and companies including AT&T, Verizon and T-Mobile, leveraging its “big bank” experience with access to non-bank capital. “The average we provide to a small business is about $750,000, and we provide facilities as small as $100,000,” says Skirzenski. “The vast majority of the capital we use does not come from banks. It comes from institutional investors, hedge funds, money markets, private wealth funds, asset managers, so it comes with a lot more flexibility.”
Through Supply Chain Financing (SCF), also known as Reverse Factoring, a buying company informs Raistone about required supply chain payments. Raistone will pay the supply chain, as soon as the next business day. Another solution, Accounts Receivable Financing, allows the supplier to get paid in advance of the due date of invoices they have submitted to their customer, without their customer’s involvement. Both options improve cash conversion cycles.
“Accounts Receivable Financing is often confused with factoring or invoice discounting, as all of these solutions leverage a company’s accounts receivables to obtain working capital,” says Skirzenski. “But Accounts Receivable Financing is non-debt. Raistone does not take over management of the company’s accounts receivable function. Clients have the flexibility to use the program only when they want to, without paying for credit lines they may not use seasonally. The program also co-exists well with our clients’ existing financing solutions.”
Raistone’s invoiceXcel (iX) is the receivables finance platform that allows Suppliers to take on more sales, Banks to offer a value-add service and Corporates to secure their supply chains. “We are embedded into the point of sale of the leading electronic invoicing and ERP systems that the vendors are already using,” says Skirzenski. This simplifies setup, ongoing operations and provides trusted data.
iX gathers invoice information to provide detailed pricing of the cost to accelerate payment on the invoice. Clients log in, select their respective invoices and immediately convert them to cash – what Skirzenski refers to as the “easy button.” Raistone then arranges to collect funds later when its client’s customer pays.
COVID added stress to an already unsustainable system. Skirzenski explains how several large companies started drawing on their revolving credit facilities. Banks used their capital to service large customers, thereby restricting it for smaller customers. He cited a Biz2Credit survey that indicated bank lending was down 50% during the pandemic. Many corporates turned off their sponsored early payment programs. To boot, telecoms have been in cash conservation mode for costly spectrum auctions. It shouldn’t be surprising that supply chains suffer as a result, according to Skirzenski.
Raistone recently worked with a cell site development company that had to finance new projects by drawing down on their bank line of credit, while waiting to get paid on previous projects from major carriers. The bank line was for $3.5MM. The bank never fulfilled their promise to increase the facility to $10MM. “Raistone initially provided a $3.5MM receivables finance facility,” says Skirzenski. This financing was complementary to the firm’s existing bank line of credit. “The company loved the ease and flexibility of working with Raistone as well as the benefit of the 95% to 100% advance rate. Their regional bank could not compete with the advance rate or flexibility and Raistone was asked to increase the facility to $10MM to completely replace the line of credit.” With Raistone’s support, the firm was able to launch a new division.
“We grow with our customers because we’re not lending against our customers’ risk. We’re buying invoices that we know are true and are going to be paid.” This process, according to Skirzenski, lends itself to scaling – lending does not. “No one ever loans you one dollar for one dollar’s worth of items, so as your business grows, if you can only borrow 60 or 80 percent of the value of your invoices, you’ll never keep up.”
Raistone hopes to add its “easy button” to additional electronic invoicing, ERP and accounts receivable automation platforms. “Our goal is to continue to make the process more automated and more streamlined. We want to continue on the path of helping small and medium enterprises get working capital.” Raistone’s receivable finance product is flexible and also works great for small/medium-sized businesses who might not be using large ERP systems. Raistone’s simple on-boarding process helps these firms to be up and running via a simple enrollment process.