Introduction to the workings of the YCS Platform
Scope of the IHF platform
Your Capital Support (YCS) provides SME loans in the form of accounts receivable financing without legal transfer of invoices as happens in the case of regular factoring.
In recent years, small business owners—especially those who rely on their invoices being paid in time—have suffered from a lack of access to capital. This has put a strain on what was once a mutually beneficial arrangement: entrepreneurs would borrow money to grow their companies and banks would profit through interest. Through the working of its platform YCS restores this symbiotic relationship.
Your Capital Support (YCS) is the Turnkey Provider of the IHF Credit
The services and software required to provide IHF Credit are offered by Your Capital Support (YCS). YCS acts as the linchpin between investors and SMEs with the following tasks:
- Partnering with investors as investment clients
- Lending the investment of capital funds and senior debt to meet financing needs of SMEs generating attractive returns
- Acquiring and overseeing SMEs as financing clients
- Operating the online platform to provide financing to SMEs
Your Capital Support (YCS) acts as a linchpin between funding investors and SME’s as a “double-sided platform”. However, SMEs are the Clients, because they make use of the “product” i.e. the IHF-credit.
Not every SME can make use of YCS financing. YCS will target SMEs that meet certain requirements during the application. The general requirements for SMEs are:
Size: YCS will follow local definitions of SMEs. The definition provided by the European Union—also used in Belgium for example—serves as a starting point for qualifying Clients:
- Micro-sized: Annual revenue of € 2 million or less
- Small-sized: Annual revenue between € 2 million and € 10 million
- Medium-sized: Annual revenue between € 10 million and € 50 million
Revenue Model: YCS financing is meant for SMEs that invoice their clients for goods and/or services. Businesses that charge upfront or deal in cash transactions are NOT a fit for YCS financing.
Years in Operation: YCS requires financial transparency. An SME’s financial history—spanning at least three full calendar years—is necessary to make an informed credit decision in regards to (A) whether to provide financing and (B) under which conditions.
Debtor Spread: To minimize risk, the general guideline is that ~80% of an SME’s revenue is generated by at least 20% of the debtors. An SME that receives a disproportionately high amount of revenue from a few clients is considered too risky.
Geography: YCS financing will initially be provided to SMEs in Belgium, with simultaneous plans to expand to The Netherlands and Luxembourg.
Adjustments and exceptions can be made—based on a qualitative conversation with a business owner—and these will be reflected in the contracts with Clients.
Revenue model for funders
Your Capital Support (YCS) will provide financing to SMEs with the help of capital investments (subordinated loans) and senior debt from private investors and institutional financiers. In Belgium, the intended remuneration for capital investments are currently under discussion in the range of:
- Capital investments (subordinated loans): Euribor + 3.5% per year
- Institutional financiers (senior debt): Euribor + 1.5% per year
The ratio between subordinated loans and senior debt will be at an acceptable level to give sufficient comfort to the funding partners. The pricing of the IHF-credit will be adjusted to local market conditions for funding.
YCS aims to be a financial partner for SMEs, enabling business owners to manage their working capital needs and facilitate growth for their companies.
Information is the cornerstone of YCS’s relationships with its Clients—and capital investors. SMEs provide in depth financial information and insight into their debtor portfolio. To secure the quality of SMEs, an initial credit assessment will take place according to a quantative and qualitative credit assessment procedure.
Organizational Structure / revenue model for strategic partners
To facilitate the start and roll-out of the YCS business model, strategic partners are foreseen that contribute to the roll-out of the model at a pan-European level and beyond. Intended strategic partners are financial institutions and business partners with local and/or international SME-scope.