If you haven’t heard of Marco Financial yet, you will soon. The “tech-enabled” factoring startup launched in 2020 with its sights set on the SME and trade financing world, specifically in Latin America. The company currently plays on the lower end of the capital spectrum, with most of its initial deal opportunities below $1 million, but with an impressive executive team, a heavy reliance on technology and the financial backing of some heavy hitters in the venture capital space, the company is poised to grow far beyond its current capabilities.
Seizing opportunities is a critical piece of the business building process. Companies that succeed beyond the startup stage identify market needs and aggressively pursue ways to solve them while constantly evolving to address new ones. That’s what Jacob Shoihet and Peter D. Spradling have done by launching Marco Financial, a digital factoring and trade finance company that relies heavily on technology and was designed to accelerate and simplify the financing process for SMEs, particularly those in Latin America. In fact, Shoihet and Spradling see the bulk of the current opportunities in the trade finance industry within the region.
“It seemed to me like there really has to be a better solution to support business owners in Latin America, especially where there isn’t as developed credit infrastructure, where there aren’t as many banks and non-bank lenders that can really help these businesses grow, and that’s when we really started to dig deeper into the space,” Shoihet, who serves as CEO of Marco Financial, says.
In addition, Shoihet notes that the region’s more open acceptance of e-invoicing creates fertile ground for a “tech-enabled” capital provider like Marco Financial to succeed.
But how did Shoihet and Spradling identify this market need — which could include a $1.5 trillion financing gap, according to the company — and join forces to address it? To answer that question, we’ll have to take a look back at the rather winding road the two business partners took to find each other.
From Trumpets to Term Sheets
Let’s start with Shoihet. He does not fit the mold of the traditional financing executive. Even though many leaders in specialty finance claim to have entered their respective industry coincidentally, they at least have some sort of finance background. For Shoihet, the path to the industry was a bit more circuitous.
Shoihet originally studied classical trumpet performance at the University of Toronto and then moved to New York City after college to pursue a career in music, studying under a former principal of the Metropolitan Opera. In his spare time, he took a side job with Nat Sherman selling cigars. His time with Nat Sherman got him interested in sales and that interest accelerated his career, as he went on to hop between sales teams at startups like Yelp, Groupon, Taboola, GumGum and Spot.IM.
“It was really an interesting lens to see how these organizations, as they continue to raise money to grow and scale, the challenges they had, how leadership operated under those conditions,” Shoihet says. “That is how I started to fall in love with the idea, and it was really my dream to start my own venture at some point. I always had these entrepreneurial aspirations.”
Shoihet began developing those aspirations into concrete ideas by enrolling in Antler, a startup accelerator with offices in Europe, North America, Asia-Pacific and Africa. While at Antler, Shoihet got his feet wet on the financing side by working on a banking software concept to help address the “pain points” for banks and their sluggish processes for underwriting commercial loans.
That’s when Shoihet met Spradling, who was all too familiar with those pain points. Originally from Uruguay, Spradling’s family has a history in importing and exporting goods in Latin America, which is the same path Spradling followed, starting multiple businesses beginning when he was a teenager. After launching a food importer called Organic Food Solutions, Spradling saw just how difficult and slow the process of getting funding could be. Even as the business did roughly $10 million in annual sales volume, Spradling still found himself spending 50% of his time looking for financing and waiting for months to get funds.
When Spradling and Shoihet met, they combined Shoihet’s perspective from working on the banking software side with Spradling’s insights on the SME experience. The two further bonded over family (both have three brothers), rugby and intermittent fasting regimens. Of course, sharing some similar hobbies and practices doesn’t necessarily equate to a successful partnership.
“Peter and I are very pragmatic, very logical, rational decision-makers,” Shoihet says. “We’re very, very calm in temperament; we don’t bring emotion into any decision making, and we saw the opportunity in the space very, very clearly.”
Filling Out the Roster
Shoihet and Spradling co-founded Marco Financial and led its recent launch. The duo work in tandem as a 50/50 partnership, with Shoihet serving as CEO and handling fundraising, talent development and organizational continuity, while Spradling serves as chief operating officer and handles day-to-day business development and operations.
Marco Financial isn’t just two people, however, and the team that Shoihet and Spradling have brought on certainly gives the company considerable talent and standing within the commercial finance industry. On the credit side, the company added Fred Leder as chief credit officer and senior vice president of operations, and Alisa Rusanoff as senior credit officer. In addition, the company hired Barry Kastner as executive vice president and senior managing director.
“We wanted to hire a top tier credit team that was really energized and understood that this is a space that needs to be innovated upon,” Shoihet says. “We want to really be a customer-first partner, so we want to ensure that we’re hiring people that are really on board with our customer-intimate nature.”
Leder and Kastner certainly understand the challenges of SMEs in Latin America. In fact, at a previous company, Leder and Kastner reluctantly turned down financing for Spradling. Now they are all partnering together to help similar companies get the funding they need.
A Cleaner Lending Process
A good team can only do so much, but Marco Financial has created a unique technology platform that aims to increase the efficiency of providing financing to SMEs in Latin America and across the globe.
“Technology is what anchors our entire workflow, from origination through underwriting through servicing,” Shoihet says. “The way we think about technology is a way to really provide a friendlier, more lightweight experience to our customers. Most folks use different softwares for servicing, but the fact that we’re approaching it from underwriting and origination in addition to servicing really ensures that it’s a much cleaner process.”
The process begins, progresses and ends across Marco Financial’s web application, with the company offering borrowers the ability to “contact them on their terms.” In addition to improved access, Marco Financial’s tech-focused approach to origination and underwriting means quicker funding decisions and faster payments to borrowers.
“If an SME is seeking this sort of financing, they usually need it in relatively short order,” Shoihet says. “We have an internal mandate to be able to underwrite transactions within business days, and we take that extremely seriously.”
To ensure that type of speed doesn’t lead to poor funding decisions, Shoihet says Marco Financial is hyper-focused on analytics and constant improvement. This means identifying trends in the industry and creating systems to identify and collect the most pertinent data for the underwriting process.
“We’re going to not only improve our processes over time — meaning faster, less operational weight — versus just doing the exact same process for every transaction in perpetuity,” Shoihet says. “The whole idea is to be able to get this process to as quick and friendly a process with as minimal documentation for our customers as possible.”
Aside from being “tech-enabled,” Marco Financial is fueled by venture capital. Investors like Struck Capital and Antler have already provided support, while Arcadia Funds delivered $26 million in funding to the company in late September, providing the type of liquidity, flexibility and speed Marco will need to build in the coming months.
“Their willingness to work with us so early is both a testament to the opportunity that they see and their understanding of the product that we’re offering,” Shoihet says.
The financing from Arcadia Funds also helped Marco Financial officially launch and begin making deals. Getting to that point during a global pandemic certainly had its challenges, but Marco Financial’s technology focus made overcoming those hurdles more seamless than it might have been for a more traditional company with legacy infrastructure and a heavier reliance on in-person interactions. However, Shoihet still understands the importance of creating relationships.
“We’d love to continue to grow, scale and develop relationships and partnerships in the industry, especially referral partnerships, as we’re seeing a lot of opportunities that, at this stage, might not be a great fit from the size or financing product they’re looking for,” Shoihet says.
In addition to forming those bonds, Shoihet has the company focused on getting deals into an already active pipeline, building out the operations team, fundraising for a next venture capital round, and developing internal data and product infrastructure, with an eye toward expanded offerings as the company scales up.
“We definitely are looking to be the best partners and support our clients in the best way we can. A natural extension of that would be being able to offer them other trade finance products or solutions that will help them grow their businesses,” Shoihet says. “We want to make sure that we’re challenging ourselves on a daily basis to think about other ways that we can support these businesses’ needs and support growth, and that is likely to involve other products that we can offer them.”
New products will likely be born out of new opportunities in the marketplace. With what Marco Financial has accomplished during the startup phase of its journey, it will be worth keeping an eye on what those turn out to be.