What is Credex?
What is it?
Small businesses are the lifeblood of our modern economy. They make up 99% of all businesses in the UK and employ 60% of all workers. Small businesses are usually interested in taking on more clients and delivering more work. Unfortunately many of them find themselves overly reliant on big corporations for the chunk of their work. As seen in the West Midlands with the recent collapse of Carillion; when these fail, small companies and their employees are unduly affected. Another major problem faced by small businesses is access to finance. The banks are not interested in lending businesses amounts below £150,000, leaving companies at the mercy of the equivalent of ‘Payday Loans’ lenders. In our analysis, we found small business loan rates in Birmingham between 40%-1000%. How can businesses get on and do what they do best?
The Credex Network Ltd believes that there is a win-win solution by addressing these issues together. It is developing a business credit network; modelled on highly successful systems in Italy and Switzerland. They allow small businesses to access zero interest credit to purchase goods and services from other small businesses within the network. They seem to work well at a regional level, where there is a enough diversity to ensure that all business needs can be met. What is innovative about this system is that the credit is provided in an complementary currency that is equal one-for-one to Pound Sterling. The currency is accepted by all of the businesses on the network and its one-for-one value makes it an easy addition to business accounts. The approach has never been tried in the UK before, but we think the West Midlands is a great place to try it out.
How does it work?
Small businesses join the network and are credit checked; allowing us to allocate a credit limit. Companies then use this credit similar to an overdraft, they go negative within their account to purchase goods and services. The credit in this system can only be spent with other companies within the network; so a negative balance in the buyers account, results in a positive balance in the sellers account. The company with the negative balance would then need to sell its own goods and services through the network to repay its debts. Whilst the company with the positive balance can buy its own supplies through the network. We made a short video showing this in action with a fictional catering company – we are working on producing better quality ones.
What are the benefits of this? Firstly, it partly addresses the access to finance problem. Credit in this network is interest free and accessible to any business that has goods and services to offer (that’s most of them). They can go negative in the network to buy supplies, then later sell goods to other local businesses to repay the credit. The only cost is a flat network fee charged by Credex to keep everything running smoothly. Secondly, in Italy and Switzerland is increases the trade and profits of all the businesses on the network. Small businesses are able to sell more through these networks, receiving the complementary currency and using it to pay for items they would have had to used Euros for. This boosts the balance sheet. Finally, these networks are great for the regional economy as they support more local business-to-business trade. Companies find it cost competitive to use these systems to regionalise their supply chains, meaning more trade and profits for local companies. In Italy, new businesses have set up to meet the demands of the local companies on these networks, which means even more localised trade and supply.
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So what happens next? Well we are receiving a huge amount of attention from business networks, local authorities, Universities and of course; small businesses themselves. They see the triple benefits we offer; interest free credit, more trade and regional development. We are close to completing our technical systems and we are planning on launching in Quarter 1 2019. Our initial stage will be free of charge for six months. It is open to any local small business or business network. We are keen to bring on as much diversity as possible, so our users can meet their supply needs through our network. If you are a small business, you want more trade or you want zero interest credit, you can find out more information and signup here. If you are a business network or local authority who wants to promote this in the region, you should connect with us through firstname.lastname@example.org. We are planning a series of events in the coming months and you can follow us on Twitter, LinkedIn and Facebook. We look forward to connecting with you.