The directors present the strategic report for the year ended 31 December 2023.
Business Review
Founded in 2017, SellersFi operates as a data-driven alternative lending platform, primarily serving e-commerce merchants, especially those on Amazon.com. Our core business involves extending loans and revenue advances through a fully integrated application process, supported by proprietary risk assessment tools. This model allows us to cater effectively to the funding needs of e-commerce businesses, offering funding terms that range from three months to four years.
Our primary objective is to deliver comprehensive financial solutions tailored to the unique needs of e-commerce entrepreneurs. We aim to:
- Expand our product offerings to include services traditionally available only through banks.
- Foster innovation in the fintech space to provide sellers with seamless access to financing.
- Maintain a customer-centric approach that prioritizes best-in-class service and support.
Performance Review
In 2023, SellersFi achieved significant milestones, including:
Revenue Growth: The Company has been affected by the macro-economic trends just like every other company in the world. Our response to the rising interest rate environment has been to increase pricing on existing products, continue prudent underwriting and we have continued funding activity through the entire period. Our performing loan balance of $154M as of December 2023 and the company has been able to grow revenues by 35% YoY.
Capital Raises & Liquidity: In 2023, the company raised an additional $12M in convertible debt led by Citibank and Mitsubishi Financial Group. In Q1 2024, the Company initiated a $50M Series B capital raise and received terms sheets from institutional investors. However, due to economic headwinds, restricted capital market activity and looming US elections, it has been decided to postpone the completion of Series B by Q2 2025. By Q4 2024, the Company will have raised a $17.5MM internal round led by current institutional investors.
Customer Base Expansion: Company is actively transitioning to a balance sheet light model by utilizing Forward Flow facilities. With anticipated new originations due to lending partnership with Amazon, forward flow facilities allow SellersFI to originate seamlessly, sell assets at premium, share on the backend profitability with flow buyers while mitigating portfolio credit risk.
Principal risks and uncertainties
A word on the Company’s Approach to Risk Taxonomy
SellersFi operates within the Fintech industry’s ecosystem which typically is comprised of Fintech start-ups (e.g., digital lending, payments, and others), technology developers, customers seeking financial services, traditional financial institutions, and regulatory authorities. Hence, the Company opted to implement a Fintech Enterprise Risk Management Framework (the “ERM Framework”) reflective of its operational model and its level of maturity and – as such – establishing a practicable approach to risk management. The ERM Framework sets forth seven categories of Risk Areas: Capital Markets, Customer Management, Regulation, Technology Integration, Security and Privacy, Risk Management Practices, and Fintech Innovative Solutions.
The below section presents the key risk factors that have been identified, including the company’s approach to mitigating those risks.
Risk | Impact on company | Mitigation |
Credit Risk | Occurrence of a major Credit Risk impact is possible, driven by higher-than-expected default rates and concentration risk. This represents a medium level of inherent risk. The poor quality of controls presently mitigating this risk further magnifies the situation and signifies a medium level of residual risk for the enterprise. | The Credit Department has taken concrete steps to improve underwriting, loan portfolio management and reporting. Credit and Collections policies are actively being updated and maintained as part of the Company’s mitigation efforts. |
Legal Risk | Although occurrence is rare, there is a minor potential impact being addressed by poor controls. This is related to the fact that policies, procedures, and trainings related to Product Development are still under development. | The General Compliance Team, in tandem with the Legal Team and other stakeholders, has been assisting in the development of the necessary policies, procedures, and trainings. |
Financial Risk | Occurrence is unlikely but there is a minor potential impact being addressed by poor controls. The most pressing vulnerabilities arise from underdevelopment of policies, procedures, reports, and trainings related to Marketing and Advertising, and Financial Management. | The areas of Finance and Marketing are focused on putting in place the necessary frameworks. This is expected to reduce the risk of financial reporting errors and targeted CAC and customer churn. |
Reputational Risk | Occurrence is unlikely, however there are poor controls mitigating against a potential major impact. This is again primarily related to the fact that policies, procedures, and trainings are all currently under development. | The Company is diligent in monitoring customer feedback and engaged in addressing any complaints and/or reviews. The Company has developed Complaints Handling Policies and Trainings as part of its efforts when mitigating reputational risk. |
People Risk | Occurrence of a moderate impact is possible, however there are poor controls attempting to mitigate exposures primarily related to inadequate staffing and no training. The lack of adequate staffing causes a domino effect, amplifying the risk exposure related to Compliance Risk. | The Company is committed to strengthening and establishing its training program, for the benefit of all employees and departments. |
Compliance Risk | Occurrence of a major impact is unlikely, however there are poor controls attempting to mitigate the large regulatory exposures. The lack of staffing exacerbates the situation by forcing a reactionary, rather than preventative, approach to mitigation. There is little to no time left over for adequate monitoring/oversight. | The Company has streamlined its practices by standardizing its procedures and increasing operational efficiencies to ensure its well positioned for growth without compromising the quality of its compliance processes. |
Future developments
2024 profitability - The Company estimates operational profitability by YE 2024 due to the following:
The company has started pricing products in step with the high-rate environment with a portfolio target of greater than 17%.
Transitioning support/junior roles to offshore countries like Brazil, thereby reducing personnel costs while maintaining workforce required for expansion.
Reducing headcount in US by eliminating non-strategic roles. In 2024, headcount reduction has resulted in cost savings of $450K annually.
Evaluating internal processes and third-party vendors’ relationships with the goal of reducing costs associated with non-core projects.
Company winning two RFPs with Amazon as their core third party lender for US and Canada. The company aims to launch the first Amazon lending product (US Line of Credit) in Q1-2024 followed by second launch (Canada MCA) in end of Q2-2024 originations anticipated at $250MM, however this is wholly dependent on Amazon internal marketing efforts for the programs.
Financial instruments
Financial instruments at fair value measurements: Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 established a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Conclusion
This Strategic Report provides a comprehensive overview of our business and its strategic direction as of December 31, 2023. We are optimistic about our future prospects and remain dedicated to delivering value to our stakeholders through innovation, customer focus, and strategic growth.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 11.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
We have audited the financial statements of Sellersfunding International Portfolio Ltd (the 'company') for the year ended 31 December 2023 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
Material uncertainty relating to going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 1.2 to the financial statements concerning the company's ability to continue as a going concern.
As described in note 1.2 to the financial statements, the group, to which the company is a member, is reliant on a third party credit facility that is due for total repayment in November 2025. The group's forecasts indicate that significant performance improvements and/or additional investment in the group is required to provide the company with the resources to continue its strategy and to ensure it is able to continue to operate.
Management have informed us that they are in active negotiations to extend/expand the existing facility but are not able to access further facilities at this stage. Discussions also remain on going over further capital investment within the group as set out within note 1.2.
Due to the nature and timing of these negotiations there is no corroborating evidence to support these on going discussions or ability to measure whether they will be successful.
Whilst the successful delivery of investment and performance improvements cannot be certain, the Director is confident these will be achieved.
The ability to secure the required additional investment and to deliver on the forecasts themselves are conditions that indicate the existence of material uncertainties, which may cast significant doubt about the Company’s ability to continue as a going concern.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the sector;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including the Companies Act 2006, taxation legislation, data protection, anti-bribery, employment, environmental and health and safety legislation;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud;
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations;
identifying what incentives there may be; and
considering sector specific weaknesses.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
investigating any legal and professional expenses incurred throughout the period; and
enquiring of management as to actual and potential litigation and claims.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
Sellersfunding International Portfolio Ltd is a private company limited by shares incorporated in England and Wales. The registered office is 6th Floor, Manfield House, 1 Southampton Street, London, WC2R 0LR.
The financial statements are presented in sterling, translated from the functional currency, the united states dollar. Monetary amounts in these financial statements are rounded to the nearest £.
In determining the appropriate basis of preparation of the financial statements, the directors are required to consider whether the Company can continue in operational existence for the foreseeable future, being a minimum period of 12 months from the date of approval of the financial statements.
Credit facilities are provided to the group by a third party (Fasanara Securitisation S.A), this credit facility enables the continuation of the company business model.
This credit facility is due for total repayment in November 2025. Management is in active negotiations to extend/expand the facility but are not able to access further facilities at this stage.
During 2023 additional credit facilities were secured and further private equity was invested in the parent company by other parties to meet the needs of the company.
The company continues to be the module of the Group which administers the operations of the group. The company relies on the other modules of the Group to continue to trade.
The directors have considered the Group's financial performance since the balance sheet date and have prepared cash flow forecasts to September 2025, underlining these projects is an improved performance which indicates that the Group will see a net income of $139,288 for the twelve months to September 2025.
As of November 2024, the Group had commitments for new capital of $16.5m, which is expected to close by the end of December 2024.
Forecasts inherently involve several judgments and assumptions as to existing and future service performance. Management is confident that the financing received subsequent to the year end and in the process of being raised will provide the Group and therefore the company with sufficient resources to continue to operate.
The requirement for additional investment and the ability to deliver on the forecasts themselves are conditions that indicate the existence of material uncertainties, which may cast significant doubt about the Company’s ability to continue as a going concern.
Nevertheless, after considering the uncertainties described above, the directors have a reasonable expectation that the Company can continue in operational existence for the foreseeable future. It is on this basis that the directors consider it appropriate to prepare the financial statements on a going concern basis. The financial statements do not include the adjustments that would result if the Company were unable to continue as a going concern.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Determining whether trade debtors require specific impairment is conducted on a monthly basis, the company assesses the original booked value against the fair value. The fair value is estimated by establishing and reviewing the data available, such as:
Assessment of whether receipts are in line with credit terms.
Review of any relevant financial reports provided by customers or via public sources.
Review of communications with the team.
Where the fair value is assessed to be less than the originally established loan value, an impairment is introduced to align with the fair value.
The average monthly number of persons (including directors) employed by the company during the year was:
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Fasanara Securitisation S.A., a Luxembourg public limited liability company, makes available to SellersFunding International Portfolio Limited (SFIP) financing at 95% of the value of qualifying loan notes made by SFIP. Any payment defaults on loan notes provided by SFIP are absorbed by Fasanara Securitisation S.A. at a value of 95%.
The financing provided by Fasanara Securitisation S.A. is secured by a fixed charge over the assets of SFIP, and by a floating charge over the assets of SFIP which are not otherwise effectively subject to a fixed charge.
The amount owed to Fasanara Securitisation S.A. at the year ended 31 December 2023 was £113,458,834 (Class A) and £15,463,112 (Class B) (2022: £103,222,268 (Class A) and £35,315,954 (Class B)). Repayment is not due before 2025.
Interest charged on the financing provided by Fasanara Securitisation S.A. is dependent on the risk assessment of loan notes provided by SFIP; 6.5%-7% interest being charged on 'Class A' loan notes and 12% interest being charged on 'Class B' loan notes.
The relating interest charge included for the year ended 31 December 2023 was £1,355,760 (2022: £9,262,513).
The following amounts were outstanding at the reporting end date: