“Transend is a private-label working capital financing and underwriting platform that helps businesses do more. Operating as a B2B software engine for growth, Transend gives buyers access to capital at the point of commerce, suppliers increased cash flow, loyalty offerings for suppliers and buyers, and banks access to immediate deal flow.”
B2B payment systems have long faced challenges due to their reliance on paper-based payments, resulting in inefficiencies and limited access to working capital. Today, B2B paper check payments amount to over $8.9T in transaction value annually. Paper-based payments are hindered by their slow processing, susceptibility to errors and fraud, and inability to meet enterprise organizations' modern and evolving needs. When businesses choose non-paper-based options like ACH payments, they frequently encounter delays as a result of end-of-day batch processing, leading to settlements taking two to three business days. On top of that, neither of these solutions do anything to encourage buyers to move through the funnel and make a purchasing decision. The business world has been slow to adopt efficient electronic payment options, in contrast to the more prevalent use of electronic payments in the B2C sector. Only a third of total B2B global expenditures are processed electronically, compared to two-thirds of B2C expenditures. The repercussions of delayed and inefficient B2B payments go beyond time, impacting working capital and leading to late payments for a significant portion of invoices. In many B2B transactions, 30, 60, or 90-day net terms are the standard that allows the buyer to pay the seller within the specified time frame, potentially boosting sales for sellers. However, a significant amount of working capital is tied up in net terms, potentially reaching 24% for businesses relying on paper-based processes, and 49% of invoices generated by US businesses end up being paid late. The flawed system of net terms has led to the practice of invoice factoring, where suppliers sell their invoices at a slight discount to third parties in exchange for upfront cash, providing a solution to cash flow challenges in B2B transactions.
Meet Transend: the first B2B private-label working capital solution redefining how suppliers do business with their commercial customers. Transend empowers suppliers to offer promotional terms at the point of commerce, providing instant access to capital and directly inspiring loyalty, increased sales, and accelerated A/R — all while opening up new deal flow for banks. Transend operates within a multi-party ecosystem, comprising the Supplier (e.g., Best Buy), Buyer (e.g., small business), Funder (e.g., banking partner), and Transend itself. Suppliers pay Transend a fee associated with the transaction, while buyers pay interest on the financing. Transend retains a portion of these fees and interest as margin. Funders provide upfront cash to suppliers and receive interest on their loans from Transend. The profitability of each transaction varies based on the terms and promotions. Transend's funding relationships with bank partners operate at the portfolio level, allowing flexibility in offering promotional offers like “0% interest” or “no payments intro period”. Transend’s flexibility and unique design create value across the ecosystem.
By partnering with Transend, suppliers immediately inject cash flow into all of its products and services by pairing terms from 30 days up to 60 months all while getting paid up front at the point of sale. This not only offloads administrative tasks but can also reduce bad debt expenses, as Transend's transaction fee may be lower than potential write-offs and the operational burden. Suppliers also inspire loyalty as Transend provides replenishing credit lines tied only to the supplier that empower buyers to keep coming back time and time again.
The global market for working capital financing is experiencing significant growth and presents a rich opportunity. Banks have traditionally provided financing solutions to buyers, with approximately 28% of businesses relying on banks for such services. The market is expected to expand at a CAGR of 10.2% between 2020 and 2027, reaching a valuation of $5.3T by 2027. Factors such as the COVID-19 pandemic, supply chain disruptions, operational challenges, and reduced cash flows have fueled the demand for working capital financing. Additionally, B2B payments, which total $120T in global transaction value annually, are ripe for disruption, with outdated methods like ACH payments and checks dominating the landscape. With the global embedded financing market growing rapidly, Transend's private label solutions are well-positioned to thrive, offering a simple and sticky promotional loan approach. As more businesses adopt digital B2B payment solutions and demand for capital increases, Transend's unique offering is positioned to catch strong market tailwinds. With several dozen suppliers and partnerships waiting in the wings for go-live, the team is off to a great start.
Transend’s team has a rich background in building financial products from zero to multi-billion dollar origination businesses as intrapreneurs at larger financial institutions. They’ve taken their learnings from pains with underwriting, customer acquisition, and consumer lending frameworks to revolutionize the B2B lending space. Co-founder Matt Lekawa has spent 20+ years in the B2B lending space, holding executive roles at publicly traded companies, including BB&T, Capital One, GreenSky, and BHG Financial. Matt’s deep industry experience and strong co-founder relationships with both Ankit Patel and Jason Jones present a strong case of founder-market fit. We at Redbud VC are excited about Matt, Ankit, and Jason’s deep industry experience and the opportunity to revolutionize the US's antiquated trillion-dollar financial services business lending ecosystem.