Twinco, the Madrid-based supply chain finance company focused on the apparel industry, is raising a $100 million debt facility, CEO Sandra Nolasco tells Axios.
Why it matters: Twinco aims to streamline the complicated and fragmented process of financing apparel production from manufacturing to delivery of goods.
Details: So far Twinco, which retained structured-debt boutique Alantra as its financial adviser, has raised $30 million toward the asset-backed debt facility, Nolasco says.
- The finance startup is currently in negotiations with alternative credit funds and investment banks to secure the remainder, she says.
- The amount of interest paid depends on the amount of risk investors in the debt facility are willing to take on.
- Historically this type of financing has a very low default rate, Nolasco adds.
Driving the news: Twinco closed a $12.5 million Series A comprising growth equity and venture debt this week.
- It was led by Quona Capital, with participation from Working Capital and existing investors Mundi Ventures and Finch Capital. Zubi Capital provided the venture debt.
- Proceeds will help expand Twinco’s presence in countries that are leading suppliers of apparel products and in its technology and data capabilities, particularly tied to ESG.
- The company has raised, including pre-seed and seed rounds, a total of about €15.5 million of growth equity and €3 million of venture debt, Nolasco says, or a little over $20 million in all.
How it works (usually): Traditionally, when a U.S. clothing brand looks to source apparel production, it submits a purchase order to a manufacturer based in a country like Vietnam or Bangladesh.
- The manufacturer would have to go to a local bank to secure a loan to purchase the materials, such as cotton, to begin producing that order.
- On the other end, the apparel wholesaler would retain a factor or factoring services to obtain cash upfront on the invoices or goods they receive while they also wait for payment.
How it works (now): Twinco steps in to cover the entire cycle from purchase order to final invoice payment.
- This helps small and medium-sized businesses in emerging markets obtain materials at lower cost, and grants apparel brands and retailers better transparency on sourcing in terms of environmental and labor practices, Nolasco points out.
By the numbers: In 2020, its first year, Twinco funded $7 million worth of purchase of orders, Nolasco says.
- In 2021, that number grew to $37 million, and in 2022 to $100 million. This year it will fund between $300 million and $350 million in purchase orders.
- Twinco’s customers buy more than $10 billion a year in goods and the company is growing between three and four times year over year.
What’s next: Twinco is initially focused on the apparel industry, but will expand its practice into other categories such as consumer electronics, Nolasco says.
- Once Twinco processes between $3 billion and $4 billion in purchase orders per year, at which it will have a clear path to profitability, it can contemplate an exit such as an IPO, Nolasco says.
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