Sun Huilai, CEO of Fengbo International: In the cross-border e-commerce industry with a trillion-scale, it is still difficult for small and medium-sized enterprises to obtain financing | Hardcore Interview

Text｜Hu Yiting

Editor｜Yuan Silai

The cross-border e-commerce is filled with grassroots wealth creation myths. One of the widely praised narratives is that college students with nothing but their bare hands resell small and light products to overseas through platforms like eBay.

Sun Huilai was once one of them. 15 years ago, when he was studying in Hong Kong, he sourced goods from the nearby Huaqiangbei and sold 3C products to overseas through e-commerce platforms. Despite the rapid growth, the problem of insufficient funds caused it to stagnate. At that time, four traditional banks and institutions rejected his financing application.

While the business was struggling to continue, he also saw the pain points of small and medium-sized cross-border e-commerce enterprises in fundraising - due to their small scale and less personal collateral assets, it is difficult to meet the loan requirements of traditional banks or institutions.

Up to now, the overall scale of China's cross-border e-commerce industry has reached the level of trillions of yuan, with small and medium-sized enterprises accounting for the majority. Sun Huilai told Yingke that even if the lending amount in the Greater Bay Area reaches 3.5 trillion yuan, there is still a financing gap for small and medium-sized cross-border e-commerce enterprises.

After discovering the long-standing and difficult problem of financing, Sun Huilai co-founded FundPark to provide a one-stop financing solution for small and medium-sized cross-border e-commerce enterprises. To date, FundPark has supported more than 17,000 merchants, and the total loan GMV is expected to exceed 4 billion US dollars by the end of the year.

FundPark has a wide investor network. In 2022, Goldman Sachs injected 250 million US dollars in the form of asset securitization, and doubled the investment to a total of 500 million US dollars in 2023. This year, HSBC injected 250 million US dollars, entering the sub-segment financing field while expanding new fixed-income methods.

Focusing on the financing status and needs of small and medium-sized cross-border e-commerce enterprises, Yingke had the following conversation with Sun Huilai (the content has been edited and sorted):

Strong Demand in the Greater Bay Area, Mainly Short-Term Demand

Yingke: Are the small and medium-sized cross-border e-commerce enterprises served by FundPark mainly concentrated in the Greater Bay Area, and what is their size range?

Sun Huilai: 70% of our (client) enterprise teams are in the Greater Bay Area. We now serve small and medium-sized cross-border e-commerce enterprises at different stages from startup to growth, including both import and export. Since its establishment, we have provided services to a total of more than 17,000 online stores.

The entire Spectrum (customer group) is actually very wide. Their annual revenue may range from a few hundred thousand US dollars to hundreds of millions of US dollars. Therefore, for our lending amount, it may range from tens of thousands of US dollars to several million US dollars. We are talking about US dollars because the main currency we are injecting now is foreign currency.

Yingke: In your current customer group, are there more brand sellers or more sellers who stock a wide variety of goods? Will the evaluation for lending to brand sellers and sellers who stock a wide variety of goods be different?

Sun Huilai: We have both sellers who stock a wide variety of goods and high-quality/brand sellers, including both export and import. There are more exports in the Greater Bay Area. When we were doing this a few years ago, there were more sellers who stocked a wide variety of goods. Then gradually, I saw that customers were transforming to develop and research their own brands.

Because our current credit underwriting (credit review) model is actually based on business flow, capital flow, and logistics, and we analyze different commodities and industries. Therefore, the indicators of our risk control model will be different for sellers who stock a wide variety of goods or high-quality sellers. But we have a matching risk control model and a matching capital product for both. Whether they are opening their own stores or supplying goods to the platform, we can cover them.

Yingke: What are the most prominent characteristics of the capital demand of small and medium-sized cross-border e-commerce enterprises?

Sun Huilai: Because they are mainly growth-oriented, most of them have short-term capital needs, which is very consistent with the characteristics of our capital products. Their short-term needs are reflected in various links of the entire supply chain, such as stocking, expanding channels, marketing promotion, and channel investment. Many times, they have short-term capital needs of about a few months.

Near the Double Eleven, that is, usually from July to August to the end of the year, is the time when the capital demand is the strongest. These small and medium-sized cross-border e-commerce enterprises start from stocking and then sell during the time nodes of Double Eleven, Black Friday, and Christmas. Their capital demand will show a cyclical pattern.

Yingke: In the past five years, how have the financing enthusiasm of small and medium-sized cross-border e-commerce enterprises with a small scale fluctuated?

Sun Huilai: In the past five years, it is actually a process from the beginning of the epidemic to the gradual recovery now. I think there has always been a significant gap in capital matching for small and medium-sized enterprises or small and medium-sized cross-border e-commerce enterprises.

Last year, a market research report said that the total loan balance in the entire Greater Bay Area in 2021 was approximately 3.5 trillion yuan. But for the vast majority of enterprises, especially small and medium-sized enterprises, it is actually not enough. You can see the GDP of the entire Greater Bay Area and the number of small and medium-sized enterprises in the Greater Bay Area. Although there is a loan balance of 3.5 trillion yuan, the loans they need are far greater than this.

So in fact, in the past five years, we have seen that even though some policies have been introduced, there are still few solutions in the market that can meet the customers' needs for the form, amount, and timeliness of financing products.

Yingke: In recent years, at which time node are there more small and medium-sized cross-border e-commerce enterprises that need financing?

Sun Huilai: In the past 15 years, the entire cross-border e-commerce has been developing upward. Now, cross-border e-commerce is actually a more mature industry. Everyone has systematically planned their own stores, channels, and investment to improve operational efficiency. When efficiency promotes scale expansion, they need a lot of capital investment. So I have seen that the capital demand has been increasing in the past 15 years. From a comparative perspective, today's capital demand will definitely be greater than that of the past two or three years.

Yingke: What are the specific needs and preferences of small and medium-sized cross-border e-commerce customers for financing amount, repayment period, and method?

Sun Huilai: Relatively speaking, they have a relatively large demand for financing products for short-term business needs. Just as I said earlier, in fact, what cross-border e-commerce needs is flexibility. Today I need this money to buy that batch of goods, to get that order, or I need this money to make a product. In fact, it needs a short-term and flexible capital demand. The demand of such customers is relatively large. But for example, if he has such a demand today, it does not mean that he will not have this demand after three or five months. The advantage is that the amount and period of the funds received are completely in line with his business cycle. When it needs a large amount of funds, we match a large amount of funds; when its volume or repayment is large and it does not need so much funds, it can repay the loan, so it does not have capital pressure. Such needs account for the majority of our customers. We also have some customized products. If customers have medium and long-term needs, there are also products that can be matched. But relatively speaking, the majority are short and flexible.

Traditional Model and More Flexible Lending

Yingke: I just heard that in fact, (FundPark) has grown very fast in the past two years. What is the growth situation in the past two years?

Sun Huilai: From the perspective of the lending amount, we have achieved almost a 2.5-fold growth in the past two years (a 2.5-fold growth each year). Since its establishment, our total loan amount is 3.5 billion US dollars, of which 1.5 billion was achieved in the first 10 months of 2024.

Yingke: Traditional banks or other financial institutions have a phenomenon of "reluctance to lend", and it is not easy for small and medium-sized enterprises to seek financing. What do you think is the fundamental reason for this phenomenon?

Sun Huilai: I think for traditional bank institutions, their risk control models for data are actually biased towards historical data. Because the core of most traditional banks is to look at your collateral and past financial reports. These things are relatively lagging. For example, their financial reports may be lagging by 12 - 24 months. Collateral is actually just looking at how much wealth a company or a person has. So under such a premise, it is actually difficult for them (traditional banks) to evaluate growth-oriented small and medium-sized enterprises, especially cross-border e-commerce. Many bosses invest their own wealth and funds in their own businesses, and they may not have much collateral.

So in fact, when we look at these small and medium-sized entrepreneurs, they invest a lot of energy and funds in their businesses. In fact, you can see how many channels are invested in their operational data, what is the marketing effect of the platform, and how their inventory and supply chain management are. These are all investments of an enterprise. But if a traditional bank or financial institution does not understand this thing and does not recognize this thing, it is difficult for them to make a risk control assessment.

Yingke: You also have cooperation with investment institutions. What is your main cooperation model?

Sun Huilai: Our capital provider network is relatively wide, including investment banks, commercial banks, hedge funds, family offices, etc. They provide funds to FundPark through an innovative asset securitization model. In fact, what is the asset securitization model? That is, we have a set of risk control models for data collection, analysis, and review, and we can conduct self-evaluation, approval, and repayment. Partners who provide funds match the funds through FundPark and give these funds to small and medium-sized enterprises. Their income mainly depends on buying our underlying assets, which are the customer's loans, and then securitizing them. This is another fixed-income for them.

Yingke: Can you share some cases of growth-oriented cross-border e-commerce enterprises financing for growth?

Sun Huilai: Yes, for example, there is a company called Ningbo Youhuo Global E-commerce Co., Ltd., which is a merchant selling large home furnishing brands. Previously, they had been limited by the long stocking cycle and the turnover rate of products due to logistics capacity or procurement funds, and their cash flow was very tight. As a result, they missed many popular products that could be bid for and purchased. Since starting to cooperate with FundPark in 2022, we have analyzed and predicted their overall business growth trend and the capital demand gap of related categories through data analysis, and accurately prepared sufficient funds. Since 2022, their business growth has been more than 50% per year. We not only helped them revitalize their cash flow, but also avoided the turnover of inventory pledges caused by blind stocking, reducing the investment risk of funds/inventory.