Paycelerate to help small suppliers get paid ahead of time

Small suppliers often face the problematic issue of long payment terms, where invoices can go unpaid for months at a time, leading to potential cash flow issues. But Hong Kong start-up Paycelerate wants to help change that.

The Hong Kong-based company operates what it calls a “dynamic discounting” platform, whereby suppliers can offer discounts on their invoices in return for the buyer making payment ahead of the payment terms.

“Many small companies are always struggling to get financing from banks, but banks find it hard to make money [by lending to them],” said Rajah Chaudhry, founder and chief executive of Paycelerate. “The fundamental reason why suppliers struggle to grow their business and need to get financing is because they’re not paid on time.”

Paycelerate operates as a marketplace for a company and its suppliers, and matches both parties based on a demand and supply model. While suppliers are able to get early payments in return for discounts, buyers are also incentivised to pay early as discounts mean better margins.

“A lot of big corporations are sitting on a lot of [short-term] cash that needs to be liquid and risk-free, and most of this cash sits in short-term deposit accounts or money market funds ... which typically generate low yields because they are [low-risk],” said Chaudhry, an ex-banker who started Paycelerate in 2016.

But by making early payments to suppliers in return for discounts, the increased yield comes in the form of a discount and improved business margins, making it a win-win situation for both supplier and buyer, he added.