Companies tottering on the brink of disaster due to delays of weeks or months in payment of their outstanding invoices have a new option thanks to Payplant, an Indian American-led start-up that expects to lend $100 million over the next year.
Payplant co-founder and co-chief executive officer Ronjon Nag, who earlier sold companies he co-founded to Blackberry and Motorola, told India-West June 27 that his company provides an option to more expensive credit card debt or bank loans for companies needing a steady cash flow to fuel their growth.
Payplant’s Pay Me Now service, through its associated Payment Alternatives Fund, provides 80 percent of the amount owed on invoices, with rates starting at 1.2 percent of the invoice amount per month — “about half of the typical non-back alternative,” Nag said.
Businesses get a preliminary quote online quickly, and funding, if approved, comes in 72 hours, he added.
With offices in Palo Alto, Calif., and Chicago, Payplant also announced June 30 that its invoicing-financing service, as of June 30, is now an approved qualified purchaser under the state of Illinois’ Vendor Payment Program.
A vendor can submit to Payplant electronically the amount owed by the state of Illinois. The vendor is then wired 90 percent of what is owed directly to their account. The remaining 10 percent is wired after the state pays the bill.
Vendors owed money by Illinois pay no fees or interest to Payplant, which makes its money from a state-mandated law, the Prompt Payment Act, which requires a one percent late fee per month for late payments, the Indian American entrepreneur said.
“We’re excited to be selected to help hardworking businesses get back on their feet after the frustrating wait on payments from the state,” added Payplant co-founder and co-CEO Neerav Berry, who was formerly chief operating officer and co-founder (with Nag) of software company Cellmania (acquired by BlackBerry in 2010).
“We think this an excellent example of how Payplant can help governments and large enterprises get payments to their vendors faster without changing their payment cycles or processes.”
Nag, who has a management science degree from MIT and a Ph.D. from Cambridge University, pointed out that when he and Berry ran Cellmania, banks rejected them for loans despite the fact they had customers with good credit histories.
“We were pioneers in the app business and know the pain caused by not getting paid on time,” Nag said, “Banks rejected us for loans even though we had top-notch customers. This drove us to develop a new way to solve this problem.”
Nag is chairman of Embee Mobile, which provides free airtime in return for tasks undertaken on a phone; an advisor to Mark/Space, a mobile synchronization company; and the founder of Ersatz Labs, a machine intelligence company. He also previously sold another start-up, Lexicus, Inc., to Motorola.
Berry previously led the development of the BlackBerry App Store and payment platforms and held senior posts at BroadVision and Oracle. He has an MBA from U.C.-Berkeley, a master’s in computer engineering from U.C.-Santa Barbara and a bachelor’s degree in technology from the Indian Institute of Technology, New Delhi.