‘A contagion’: Future of Melbourne fintech Fundsquire in question

Small businesses and start-ups across Australia have been left in the lurch following the apparent collapse of Melbourne-based cash flow financing outfit Fundsquire.

Fundsquire, which has offices across Australia, the UK and Canada and more than 50 employees globally, provides loans to start-ups and SMEs through early access to their R&D tax credit payments.

Small businesses and start-ups across Australia have been left in the lurch following the apparent collapse of Melbourne-based cash flow financing outfit Fundsquire, which has stood down its dozens of staff and abruptly ended some of its loan arrangements, according to an email seen by The Australian.

Fundsquire, which has offices across Australia, the UK and Canada and more than 50 employees globally, provides loans to start-ups and SMEs through early access to their R&D tax credit payments. Last year it raised $75m from investment firm Fasanara Capital to deploy across Australia’s start-up sector.

“Whether you’re a pre-revenue start-up that’s between funding rounds, have seasonal or lumpy cash flow, or are just looking for more capital, Fundsquire can help you boost cash flow and grow your business,” the company’s website says. “Among different funding options, the R&D loan boasts an amazing additional benefit. If you’re a high-growth tech scale-up and are borrowing money to invest in R&D, the Advance Funding will allow you to increase the size of your final R&D tax credit.”

Fundsquire announced in September that it had lent more than $110m in funding to start-ups and small businesses globally. Some of its funded companies include plant science start-up DryGro, biotech Oceanium and fitness app platform FitMyLife.

Fundsquire founder and CEO Damien Petty.

“This is a landmark achievement for Fundsquire, and it’s proof that our tech-enabled, relationship-driven business adds value to early-stage founders and companies,” Fundsquire chief executive and founder Damien Petty said at the time.

“We offer companies up to 90 per cent of their future grant payments upfront, and we’re seeing founders and CEOs jump at the opportunity to fund their grant projects without impacting their operating cash flow.”

Mr Petty added in a LinkedIn post announcing the news, “This was supposed to be a $100m milestone but we deployed $10m while writing it.”

Just three months later Australian start-ups that were relying on loans from Fundsquire are now scrambling to find alternative funding, particularly amid dire economic conditions for tech companies, many of which have been forced to lay off staff or close.

Mr Petty, who founded Fundsquire in 2016, declined to respond to detailed questions sent by The Australian and refused requests for comment.

One start-up CEO, who requested anonymity, said their company was in the process of finalising a new loan with Fundsquire before being told all of its two dozen local staff had been stood down earlier in the month.

“To whom it may concern, Fundsquire is unable to proceed with all loan applications this year,” the email sent to the start-up CEO reads. “Unfortunately, all staff were stood down as of the 1st of December. We apologise for the inconvenience this may cause.”

The CEO said Fundsquire’s closure would likely cause pain throughout the local tech sector, which is already grappling with financial difficulties.

“I am concerned that there is likely to be a number of companies who were relying on Fundsquire R&D lending before the end of the year,” the executive said. “It could spell contagion in the ecosystem as who knows who was waiting on funding, and who has current loans and if their insolvency could trigger early repayments.”