“We would get up to $500,000 worth of projects per year, [which is] big for a Philippines company,” Fetalino said. “But … there were times when we couldn’t pay payroll, we couldn’t pay our suppliers, and it’s because 80 percent of our books are receivables, unpaid collectables. During one of the worst periods, I had to sleep in the office for three months because I could no longer pay my rent. I had to sacrifice my salary so we could allot the money the company had for the employees.”
Fetalino knew he wasn’t alone. From talking with fellow small business owners, he was acutely aware that many of them struggled to survive while waiting for major clients to pay them. Getting a loan to cover the gaps was out of the question for most of them, since by law, businesses must be operating for at least three years before they can access financing and meet certain liquidity standards and other thresholds to qualify. Although alternative financing platforms often target borrowers who don’t meet traditional credit standards, they are constrained by the same regulations.
So while small businesses might obtain lucrative contracts from major corporations, they repeatedly find themselves cash-strapped while waiting for their invoices to be paid. When payers are on 30-60 cycles, the waiting game can nearly force the suppliers out of business, Fetalino explained.
Given that more than 99 percent of businesses in the Philippines fall under the category of micro, small, or medium enterprises, Fetalino was sure his fellow business owners would welcome a solution to this chronic issue. That’s how he created Acudeen.
Doing good by doing business
Acudeen is a fintech company that partners with big corporations and streamlines their payment systems. Working with Rizal MicroBank, a subsidiary of RCBC, Acudeen pays invoices on behalf of the corporations so their suppliers don’t have to wait two months to receive payment. When the corporations fulfill the invoices on their ends, the money goes to Acudeen, which then repays the bank.
Although Fetalino’s goal was to help small business owners, he decided to target the invoicing process instead of creating a financing system for SMEs. Rather than get into the credit assessment game, he simply made it easier for MNCs to pay and for small businesses to be paid.
By working with corporations to automate their processes, Acudeen reduced personnel costs and instances of fraudulent billings, further incentivizing them to use the system. Acudeen’s system connects to whatever accounting software a client already uses, and that access allows them to qualify invoices. They also offer smart contract systems to facilitate faster approvals and executions on business agreements.
“We’re coming in not just to serve their suppliers but to help them make sure that their invoice management system is in place and that they’re coming in at half the costs they’re currently working on with the way they do things manually,” he said.
Acudeen currently works with four publicly listed companies who work with a combined 250 suppliers. Fetalino said he expects Acudeen to onboard eight more companies this year, expanding the number of impacted suppliers to 600. He noted that they’ve been approached by small business owners requesting that Acudeen partner with certain companies so they could take advantage of its services, and that corporations have approached them as well.
Fintech beyond borders
“We’re literally providing financial inclusion in the business community in the Philippines,” Fetalino said.
But his vision extends beyond the borders of his home country.
“We’ve seen how similar the opportunity is in other emerging markets in Southeast Asia,” he said. “We’re already starting to explore bringing the technology to [other] markets.”
Given that SMEs make up 95-99 percent of businesses across ASEAN, Acudeen may find its solution is met with open arms in countries such as Vietnam, Thailand, and Myanmar.
However, Fetalino said Acudeen’s team hopes to turn the company into a “massive agent to provide access to financing to micro-businesses in the future.”
He said they’ve been approached by development organizations such as the International Finance Corporation (IFC) to give their insights into providing access to financing to micro- and small-enterprises.
“We have founders who are doing this because the founders want to make a change,” Fetalino said. “More than making revenue, we are doing this for financial inclusion.”