While Britain has so far avoided large-scale business collapse in the wake of the Covid-19 crisis, there are worrying signs that business failures are on the increase. The latest Government data shows there were 1,446 company insolvencies in September, a 56% increase on the same month of last year. The trickle could turn into a torrent, warns Flemming Bengtsen, CEO of insurtech startup Nimbla, which is today announcing the successful completion of a £5.1 million seed funding round.
“Business failures are rising now the emergency support the Government offered during the Covid-19 crisis is being withdrawn—the zombie companies are not going to survive,” warns Bengtsen. “The danger is that we get a domino effect, as failing businesses go under with unpaid bills that then cause other businesses problems.”
Nimbla could have a crucial role to play in combating this crisis. It offers credit insurance, enabling businesses to insure invoices they have issued to customers for work completed. If the customer fails to pay their bill, the insurance kicks in, so the business is not out of pocket.
The idea is not a new one, but Nimbla’s technology and innovation could mean many more businesses are able to access this insurance. “The credit insurance market hasn’t changed much in 50 years so we are dragging it into the 21st century,” says Bengtsen. “We want to make sure that even the smallest businesses can access it, as well as the large corporates that currently buy cover.”
Traditionally, Bengtsen points out, credit insurers deal in bulk, with businesses required to insure all of the invoices they issue. That makes premiums expensive and doesn’t meet policyholders’ needs, since many only want to cover their most important customers or their largest invoices.
Nimbla’s solution is an automated digital platform that provides instant quotes to businesses looking for insurance, whether they’re seeking to cover a single invoice or their whole customer book. Fewer than 4% of small businesses currently use credit insurance products, Bengtsen says, but improving access to cover could substantially increase that number.
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The company is exploring two different routes to growth. One is to sell direct to businesses that want to buy cover. Second is to embed its insurance solutions in the finance products sold by banks and other alternative finance providers; the company has developed APIs so that such providers can simply plug its insurance into their own digital offerings, with Barclays Bank an early partner for the business.
Nimbla CEO Flemming Bengtsen
Credit insurance doesn’t simply protect businesses but can also play a crucial role in unlocking growth, Bengtsen argues. For example, increasing numbers of companies rely on invoice finance as they invest for the future, borrowing against the value of unpaid invoices in order to free up cashflow. However, invoice finance lenders may be less prepared to lend against certain invoices as the risk of default increases.
Bengtsen believes now is the right moment to step up Nimbla’s activities. “U.K. companies added £1.9 trillion of debt to their balance sheets in 2020, taking the total amount outstanding to over £6.6 trillon; this number was boosted by the various government loan schemes offered to businesses but in large part it is creditor debt,” he says. “While over half of them are carrying toxic debts which are unlikely to be paid, there is a huge opportunity and responsibility for Nimbla to give companies peace of mind and insure their invoices against insolvencies.”
Today’s funding should give Nimbla the firepower it needs to drive expansion, both through its direct channel and with its embedded solutions. The round was led by Fin VC, a Silicon Valley-based venture capital fund, but Barclays Bank also participated.
The cash will go towards further product development, Bengtsen says, but will also support the company’s expansion, both in the U.K. and as it plots moves into markets including Europe and the U.S.
In fact, the business is already growing quickly. Nimbla has sold 10,000 policies over the past 18 months and has around 2,700 active monthly users on its platform. It is one of a growing number of insurtech businesses in the U.K. to have developed through the Financial Conduct Authority’s “sandbox” regime, through which innovative financial services companies are given more freedom to build out their products and services before facing the full force of financial services regulation.
