# Forecast-based financing for SMEs
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-03-17
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Boost Retail SMEs with Innovative Cashflow Solutions
Meta Description: Learn how SMEs can overcome cashflow challenges and compete with major retailers using real-time data analysis for disruptive financing solutions.
URL: https://financedigest.com/forecast-based-financing-for-smeshtml

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_By_ **_Tomas Formanek,_** _CEO and Founder of Inventoro_

SMEs represent roughly [99% of all companies in the EU](https://globalnaps.org/issue/small-medium-enterprises-smes) and employ as much as 60% of the global workforce. Despite their social importance, they are often left behind in national programs, access to technology and, above all, funding.

Cashflow is holding retail SMEs back and with little to no cash, their ability to compete with major conglomerates such as Amazon, Alibaba, and others, who will never find it hard to access money at scale, [needs improvement](https://www.financedigest.com/what-needs-to-happen-to-improve-the-landscape-for-smes-trying-to-access-finance-options-in-the-uk.html "What needs to happen to improve the landscape for SMEs trying to access finance options in the UK").

This is especially evident in retail and wholesale e-commerce. Goods sellers worldwide [need fast and easy access](https://www.financedigest.com/55-of-uk-smes-unable-to-access-all-funding-needed-to-grow.html "55% of UK SMEs unable to access all funding needed to grow") to cash to keep their inventories full. Given [global supply](https://www.financedigest.com/oil-prices-steady-on-uncertain-global-outlook-and-supply-concerns.html "Oil prices steady on uncertain global outlook and supply concerns") problems, keeping inventories full seems like the best strategy to deal with disruption. Because when they fail to satisfy demand, the major retail barons take their place and stay forever. That’s bad for the market, bad for the economy and bad for the consumer.

[Funding for SMEs surely](https://www.financedigest.com/need-additional-funding-but-not-sure-how-to-go-about-it.html "Need additional funding but not sure how to go about it?") deserves disruption. The traditional model of [financing is not fit for their needs](https://www.financedigest.com/7-finance-career-options-to-consider-and-what-you-need-to-know-about-each.html "7 Finance Career Options to Consider and What You Need to Know About Each"). They face silent discrimination by virtue of the fundamental [rules of the traditional banking system](https://www.financedigest.com/why-a-rules-management-system-can-untie-financial-services-hands.html "Why a rules management system can untie financial services’ hands").

Major banks (despite their massive investments in IT in the last decade) remain a one-trick pony. “Show us your historical [profits and our computer will tell you if you are eligible for financing](https://www.financedigest.com/bootmaker-dr-martens-warns-on-profit-as-finance-chief-walks.html "Bootmaker Dr Martens warns on profit as finance chief walks") or not”, they say. But that’s not how [companies work in today’s fast-moving world](https://www.financedigest.com/kelda-technology-selected-as-one-of-thetop-30-cleantech-companies-in-the-world.html "Kelda Technology selected as one of thetop 30 cleantech companies in the world"). Retail and wholesale companies produce huge amounts of data each day that can be analysed in real-time, giving the [financing institution more scope into the actual health and needs of an organisation](https://www.financedigest.com/cyber-threats-for-finance-organisations-to-watch-in-2023.html "Cyber threats for finance organisations to watch in 2023"), especially as they grow.

The [global pandemic saw huge growth in retail](https://www.financedigest.com/global-food-makers-retailers-remain-in-crisis-mode.html "Global food makers, retailers remain in crisis mode") and e-commerce. We literally saw small one-man bands skyrocket into middle-size companies. However, this staggering growth is too fast for many businesses to deal with. We talk to business owners on a daily basis and hear the same words again and again: “We [live day](https://www.financedigest.com/pensions-awareness-day-could-you-get-by-on-less-than-living-wage.html "Pensions Awareness Day: Could you get by on less than living wage? ") by day; we basically hold the company together with magnets and hope it will last”.

We operate an inventory forecasting company, [inventoro.com](https://inventoro.com/). We forecast [future sales of clients based on their historical data](https://www.financedigest.com/investing-in-the-future-with-alternative-web-data.html "Investing in the future with alternative web data") with high accuracy. And we see the needs for cash. We live the struggles of retail SMEs from a very close perspective, something that has been bothering us for a long time, and something we aren’t alone in.

Disruptive financing [startups have quickly](https://www.financedigest.com/4-strategies-for-quickly-growing-your-startup.html "4 Strategies for Quickly Growing Your Startup") emerged. We chose [Flowpay.io](https://www.flowpay.io/) as our partner and they now run our pilot, giving our clients easy access to funding.

The principle of our partnership is simple. Our AI [predicts our clients’ future sales and values](https://www.financedigest.com/2021-predictions-realising-the-value-of-payments-transformation.html "2021 Predictions: Realising the Value of Payments Transformation") the perfect amount of inventory that needs to be ordered from suppliers to match consumer demand. This places a very exact, very business-associated price tag on the [financing needs](https://www.financedigest.com/why-finance-teams-need-to-go-beyond-numbers-to-an-active-relationship-with-data.html "Why finance teams need to go beyond numbers to an active relationship with data ") of our clients. We [share this data](https://www.financedigest.com/european-shares-edge-higher-on-healthcare-lift-weak-china-data-stokes-worries.html "European shares edge higher on healthcare lift, weak China data stokes worries"), upon the client’s consent, with Flowpay.io. They plug this [data into their learning algorithms and within minutes create a one-click offer](https://www.financedigest.com/aon-data-empowers-unica-to-offer-flood-insurance-for-5-2bn-canadian-peril.html "Aon data empowers Unica to offer flood insurance for .2bn Canadian peril") directly to our clients. If they agree, they receive cash within the next 24 hours, just like [financing should really](https://www.financedigest.com/student-finances-exposed-how-do-they-really-spend-their-money.html "Student finances exposed: How do they really spend their money?") work for anyone.

Disruptive data-driven startups emerge everywhere. We are at the forefront of a financing revolution for SME companies. [Wayflyer.com](https://www.wayflyer.com/) is already an established data-driven financing startup with over half a billion USD in e-commerce business funding. They naturally saw an opportunity in inventory planning and the associated [financing and started their own inventory management](https://www.financedigest.com/how-parents-can-help-students-manage-their-finances.html "How Parents Can Help Students Manage their Finances") services earlier this year.

Data-driven fast and easy [access to cash](https://www.financedigest.com/supporting-a-fair-and-resilient-society-by-protecting-access-to-cash.html "Supporting a fair and resilient society by protecting access to cash ") will become the norm. It is tailored, it is unbiased and it is low risk for the [financing institution if the data](https://www.financedigest.com/theres-nothing-artificial-about-the-role-of-ai-and-data-in-the-finance-industry.html "There’s nothing artificial about the role of AI and data in the finance industry ") source is rich. Access to data-driven [financing](https://www.financedigest.com/700000-employees-across-the-uk-have-access-to-fair-finance-will-reach-one-million-employees-in-2017.html "700,000 Employees Across The UK Have Access to Fair Finance, Will Reach One Million Employees in 2017") is associated with access to super-IT, which takes us to our last point.

Most SMEs, retail or not, are still [Excel managed](https://www.financedigest.com/goodbye-excel-spreadsheets-hello-performance-management-tools.html "Goodbye excel spreadsheets, hello performance management tools"). This creates an unsustainable technological divide between the small and the super-powerful conglomerates. All those major data houses, all the best AIs, all the top-rated developers of Amazon, they all create an environment that simply gives little to no chance for smaller [companies to compete](https://www.financedigest.com/how-can-financial-services-companies-compete-more-effectively-in-times-of-uncertainty.html "How can Financial Services Companies compete more effectively in times of uncertainty?").

But the process of so-called “democratisation of technology” is [quickly changing](https://www.financedigest.com/seeking-right-tone-new-uk-pm-truss-had-to-quickly-change-gear-for-queen.html "Seeking right tone, new UK PM Truss had to quickly change gear for queen") the landscape. AI and other cutting-edge technologies are no longer a luxury of the enterprise. Accessible, easy-to-set-up SaaS tools create a plateau of opportunities for our local heroes at an affordable price.

Small companies have access to cutting-edge technology like never before. This creates a double-positive effect. Not only can they immediately cherish the benefits of data-centred algorithms. Further machine-to-machine [communication can increase the benefits](https://www.financedigest.com/teach-first-reaps-the-benefits-of-joined-up-communications-with-via-voice.html "Teach first reaps the benefits of joined-up communications with via voice ") as SaaS startups become interconnected with APIs. Such connected environments create cases for data-driven financing and will surely become the new norm for SMEs. Indeed, it is already happening.


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