WO2014167531A1

WO2014167531A1 - Method and system for obtaining funding

Info

Publication number: WO2014167531A1
Application number: PCT/IB2014/060637
Authority: WO
Inventors: Terence John Frederick Haydon; Martin Charles John Haydon
Original assignee: COMMERCIAL FACTORS Ltd
Current assignee: COMMERCIAL FACTORS Ltd
Priority date: 2013-04-12
Filing date: 2014-04-11
Publication date: 2014-10-16
Anticipated expiration: 2015-10-12
Also published as: AU2013204304A1

Abstract

A system for obtaining funding for an entity comprising : a server with an accounts system and an auction/tender system, wherein the accounts system comprises data on financial obligations previously owed to a third party (or party associated with the third party) but in which in the entity has received an interest in return for consideration to the third party, and wherein the auction/tender system operates a competitive process for seeking funds from an investor on the basis of: the entity having an interest in the financial obligations, and repayment being in accordance with a financial instrument

Description

METHOD AND SYSTEM FOR OBTAINING FUNDING Field of the invention

The present invention relates to the field of business financing, and in particular, to the acquisition of funds by an entity from investors to facilitate the business financing of that entity.

Background of the invention

Ensuring adequate cash flow is always a constant issue that must be managed by all businesses. Many businesses look to source temporary or medium term funding to ease and/or assist their cash flow position and planning . This funding takes the form of working capital although this invention is not restricted to working capital alone and incorporates all forms of business funding which can be used for any operations of the business. Businesses often look to banks for lines of credit or finance companies for loans, for example. In another option, businesses look to cash flow funding entities (CFF entities)(such as factoring companies) which provide funds on the basis of the borrower's assets and undertakings, including stock, invoices or accounts receivable and/or any other assets or undertakings that the borrower can provide to secure the advance from the CFF entity.

Those providing funding, CFF companies require funding themselves. For example, when a CFF company provides funds to a client (that is, a third party business fund requester such as an SME) the CFF company itself must have access to funds. These funds can come from their own pre-arranged resources, such as cash reserves, and/or funding lines or lines of credit. The CFF entity requires access to funds to fund their own financial obligations to provide continuity of capital to their third party borrowing client. Often however, the existing resources are not sufficient or cost effective.

It is an object of the present invention to provide an alternative source of funding for a CFF entity or other business.

Summary of invention

In general terms, the present invention relates to a way of fundi ng a business entity using the funds of investors secured by way of financial instruments that are created and backed by financial obligations (and optionally other assets and/or undertakings) that the business has an interest in. The business might be for example a CFF that provides funding to a third party business, and the financial obligations (and optionally other assets and/or undertakings) are those owed to (or of) the third party business (or an associated entity) but which the CFF obtains an interest in. Alternatively, they could be the financial obligations owed to (and optionally other assets and/or undertakings of) a business requiring funding for its own other business purposes.

In one aspect the present invention may be said to consist in a method of funding an entity comprising the entity:

receiving an interest in financial obligations owed to a third party (or party associated with the third party) in return for consideration to the third party,

seeking funds from an investor on the basis of:

the entity having an interest in the financial obligations, and

repayment being in accordance with a financial instrument.

Preferably the funds are sought on the further basis of:

the face value of the financial instrument being correlated with the value of the financial obligations thus providing confidence to the investor that there are financial resources for repayment.

Preferably the interest is at least assignment of the financial obligations and optionally the entity further receives one or more of:

a security over the financial obligations owed to the third party or associated party,

an interest in the undertakings and/or assets of the third party or associated party.

Preferably seeking funds from an investor are further on the basis of one or more of: the entity having a security over the financial obligations,

the entity having an interest in the undertakings and/or assets of the third party or associated party,

repayment being guaranteed by the entity,

repayment being guaranteed by a third party guarantor,

the investor acquiring a security over the financial obligations, and/or

the investor having the right of assignment of the financial obligations.

Preferably seeking funds from the investor comprises the entity:

determining a purchase price for a proposed financial instrument with an investor, arranging the financial instrument governing repayment in accordance with the repayment terms, and

receiving the purchase price from the investor. Preferably the method further comprises the entity doing one or more of:

providing a repayment guarantee to the investor,

arranging a third party guarantor for a repayment guarantee to the investor, allowing the investor to acquire a security over the financial obligations, and/or arranging a right of assignment of the financial obligations to the investor.

Preferably the financial instrument is one of:

• a promissory note

• a cheque

· a letter of credit

• tax refund

• IOU

• Bill of exchange

• Or any other known or new financial instrument.

Preferably determining a purchase price comprises:

offering the proposed financial instrument for purchase, the proposed financial instrument having at least a face (repayment) value and a term for repayment,

receiving from one or more investors an offer of a purchase price to purchase the financial instrument through a competitive process,

accepting the purchase price from one of the investors in accordance with the rules of the competitive process.

Preferably the financial obligations are:

some or all of the accounts receivable of the third party or associated party, or one or more outstanding invoices issued by the third party or associated party to its debtors.

Preferably repaying the funds to the investor in accordance with the repayment terms of the financial instrument.

Preferably determining a purchase price occurs :

on an online auction or tender, or

by direct negotiation, such as in a private placement.

Preferably determining a purchase price occurs on an online auction or tender wherein the entity offers the financial instrument for purchase on the online auction or tender and receives via the online auction or tender the purchase price from the investor using the online auction or tender. Preferably the term of the financial instrument the entity provides details of the financial obligations so that the investor can monitor payment progress of the financial obligations. Preferably the entity is a CFF funding entity and provides working capital funds as the consideration, wherein the sought funds are used to provide the working capital funds to the third party entity for its business operation.

In another aspect the present invention may be said to consist in a method of funding a CFF funding entity or other business comprising acquiring the investment funds of investors on the basis of financial instruments that are created and performed by the bundling or single allocation of assets and undertakings i ncluding the assignment of invoices and/or accounts receivable that are sourced from thi rd party clients who assign invoices and/or accounts receivable and/or give a security interest in any assets and undertakings in exchange for the funding from the CFF funding entity.

In another aspect the present invention may be said to consist in a method of funding a business comprising acquiring funds from an investor on the basis of the business having an interest in a set of financial obligations owed to the business or a third party (or party associated to the third party), wherein acquisition of the funds is in accordance with a financial instrument.

In another aspect the present invention may be said to consist in a method of funding an entity comprising the entity:

receiving an interest in a set of financial obligations owed to a third party (or party associated with the third party) in return for consideration to that third party, offering a proposed financial instrument for purchase on the basis that the entity has an interest in the set of financial obligations so can honour the financial instrument. In another aspect the present invention may be said to consist in a system for obtaining funding for an entity comprising :

a server with an accounts system and an auction/tender system,

wherein the accounts system comprises data on financial obligations previously owed to a third party (or party associated with the third party) but in which in the entity has received an interest in return for consideration to the third party, and

wherein the auction/tender system operates a competitive process for seeking funds from an investor on the basis of:

the entity having an interest in the financial obligations, and repayment being in accordance with a financial instrument. Preferably the funds are sought on the further basis of:

Preferably the interest is at least assignment of the financial obligations and optionally the entity has further received one or more of:

repayment being guaranteed by the entity,

repayment being guaranteed by a third party guarantor,

the investor acquiring a security over the financial obligations, and/or

the investor having the right of assignment of the financial obligations.

Preferably seeking funds from the investor comprises the competitive process:

determining a purchase price for a proposed financial instrument with an investor.

Preferably the financial instrument is one of:

a promissory note

a cheque

a letter of credit

• tax refund

IOU

Bill of exchange

Or any other known or new financial instrument.

Preferably determining a purchase price comprises:

offering the proposed financial instrument for purchase on the tender/auctions system, the proposed financial instrument having at least a face (repayment) value and a term for repayment, receiving on the tender/auction system from one or more investors an offer of a purchase price to purchase the financial instrument through a competitive process,

accepting on the tender/auction system the purchase price from one of the investors in accordance with the rules of the competitive process.

Preferably the financial obligations are:

Preferably during the term of the financial instrument the tender/auction system provides details of the financial obligations so that the i nvestor can monitor payment progress of the financial obligations. In another aspect the present invention may be said to consist in a system for obtaining funding for an entity comprising a server with an auction/tender system for:

offering a proposed financial instrument for purchase on the basis that the entity has an interest in a set of financial obligations so can honour the financial instrument. In another aspect the invention can relate to, any business requiring funding (whether for its own purposes or for funding another third party business) and will include although is not restricted to banks, invoice discounters, factoring companies and any other capital (short or long term) provider acq uiring funds to on lend to third-party borrowers. The entities seeking investor funds can be termed cash flow funding companies (CFF) . Alternatively, the invention may be used by a business entity to allow it to bundle its own financial third party obligations i nto a financial instrument for sale to fund itself.

In this specification where reference has been made to patent specifications, other external documents, or other sources of information, this is generally for the purpose of providing a context for discussing the features of the invention. Unless specifically stated otherwise, reference to such external documents or such sources of information is not to be construed as an admission that such documents or such sources of information, in any jurisdiction, are prior art or form part of the common general knowledge in the art.

The term "comprising" as used in this specification means "consisting at least in part of".

When interpreting each statement in this specification that includes the

term "comprising", features other than that or those prefaced by the term may also be present. Related terms such as "comprise" and "comprises" are to be interpreted in the same manner.

To those skilled in the art to which the invention relates, many changes in construction and widely differing embodiments and applications of the invention will suggest themselves without departing from the scope of the invention as defined in the appended claims. The disclosures and the descriptions herein are purely illustrative and are not intended to be in any sense limiting . Where specific integers are mentioned herein which have known equivalents in the art to which this invention relates, such known equivalents are deemed to be incorporated herein as if individually set forth .

The invention consists in the foregoing and also envisages constructions of which the following gives examples only.

Brief description of drawings

Preferred embodiments of the invention will be described with reference to the following drawings, of which : Figure 1 is a flow diagram showing transfer of assets between parties when implementing a funding method/system for an entity according to an embodiment.

Figure 2 is a block diagram showing a system for implementing the method of funding an entity.

Figure 3 is a flow diagram showing the method of funding an entity. Figures 4 to 6 show invoices/accounts receivable that are batched to form the basis of a financial instrument.

Figures 7 to 10 show screen shots of a tender/auction system offering a financial instrument for purchase and receiving bids for purchasing the financial instrument.

Figure 11 shows a screen shot of a list of proposals comprising financial instruments for purchase.

Figures 12 and 13 are flow diagrams showing transfer of assets between parties when implementing the funding method/system for an entity according to two alternative embodiments.

Detailed description of preferred embodiments Figure 1 shows an overview of the present invention 1. A business 10, such as a small to medium enterprise (hereinafter: third party funds receiver (TPFR) ) is shown. The TPFR as part of its business has debtors 11; being customers that purchase the goods and/or services of the TPFR using credit (such customers become "debtors") . As a result, the TPFR issues one or more invoices for those purchases which are paid on specified credit terms. Together, the issued invoices 11a form accounts receivable l ib of the TPFR. Issued invoices 11a and accounts receivable l i b can be termed "financial obligations owed to the TPFR" or for brevity "TPFR financial obligations".

If the TPFR 10 requires working capital C or other funding (hereinafter generally referred to as: "working capital") to assist cash flow and/or other operations of its business, it approaches a funding Cash-flow funding entity (CFF) 12 to request funds, of a certain monetary value. The funds could be requested as a line of credit, advance, creditor payment, loan or a non-repayable drawdown, for example. The CFF entity 12 can be any suitable business, such as a factoring company or bank, for example, or any other entity that provides working capital . The TPFR 10 might become or be a client of that CFF entity 12. In return for funding, the TPFR 10 entity is willing to provide an interest in its accounts receivable or at least some of the invoices thereof (B) . The interest provided vests the legal right in the CFF entity 12 to utilise the accounts receivable (or some invoices thereof) as a legitimate basis to acqui re investment. For example, the CFF 12 can use the stream of cash flow F as a backing for a proposal to sell a financial instrument. The interest might be a security over the financial obligations or an outright assignment of the financial obligations such that the debtors 11 would owe the outstanding debt to the CFF funding entity 12 (such as shown in Figure 1) . In one preferred implementation, the interest is an assignment of the financial obligations, with an additional optional security interest over the accounts receivable for additional rights. Optionally, further additional interests might be provided to the CFF entity 12, such as security over the assets and undertakings of the TPFR 10. Other interests are possible too. In addition to providing the CFF entity 12 with financial backing for acquiring i nvestment, any interest could optionally provide the CFF entity 12 with further legal avenues to recover payment from debtors should they default. Any interest be it an assignment, security interest or otherwise, will be effected in accordance with local laws be that by documentation and/or registration on a security register or similar.

The funding entity 12 and third party 10 agree on the level of funding and monetary value of financial assistance to the TPFR 10 and financial obligations that the CFF funding entity will accept. CFF entity 12 takes an interest (preferably at least assignment of the TPFR financial obligations, and optionally a security over those financial obligations and over the assets and undertakings of the TPFR.) The assigned TPFR financial obligations then become owed to and directly payable F to the CFF and so become "CFF financial obligations". The CFF entity 12 fulfils the funding request of the TPFR 10 and transfers or otherwise makes available to the TPFR the agreed level of funds (either as an advance, loan, line of credit or creditor payment on behalf of the TPFR 10 or outright payment depending on the arrangement) with TPFR . The difference in the value of the CFF financial obligations and the monetary value of the agreed level of funding provides a margin, the margin being a buffer that protects the CFF to some degree from debtor default. The CFF will take an agreed commission or other payment for providing the funding service. Payment by the debtors 11 covers the funds that the CFF 12 provides to the TPFR 10 and interest and costs, and any excess payment can be passed to the TPFR. The requested funds C made available to the TPFR 10, the commission and the interest(s) provided in the financial obligations and other assets from the TPFR to the CFF become consideration to a funding agreement and secures the CFF entity.

When a CFF entity 12 provides funds to a client (that is, a third party business borrower requiring funds, such as an SME) the CFF entity will typically requi re security to support any such advance. Security normally takes the form of a registered security interest over all (or part) of the assets and undertakings of the borrower. Assets and undertakings can be secured by a charge or assigned to effect the outright transfer of ownership of the secured assets. It is these assets and the fact that the CFF entity takes an interest in them (either as an assignment of or security in) that further forms the basis of the ability to offer financial instruments supported by the CFF financial obligations.

The CFF funding entity 12 may need to acquire funds itself in order to provide the agreed funding to the TPFR 10. If it does need to acquire funds, the CFF funding entity looks to obtain the funding through borrowing it off people or entities 13 (candidate/potential investors) that have money to invest. The CFF entity 12 creates an investment proposal for candidate/potential investors 13 that might want to provide the investment funds that the CFF seeks. To do so, the CFF funding entity initiates a process whereby it "bundles " (either some or all of) the CFF financial obligations (that were originally owed to the TPFR which it now has an interest in). The CFF entity then creates a proposal for a financial instrument (hereinafter: "proposed financial instrument") for purchase by an investor 13 at a yet to be settled purchase price. The proposed financial instrument D sets out among other terms, a monetary value to be paid (face value of financial instrument) at maturity and the term of the financial instrument (that is, repayment date of the face value) . The monetary value of the financial instrument is preferably correlated (e.g . commensurate but usually not the same) to the investment funds the CFF requires in order to provide the agreed funds to the TPFR. At this point the financial instrument is only a proposal because the eventual investor is still to be determined . The proposed financial instrument is backed by/based on the bundled CFF financial obligations. For example, the investment funds being sought from investors and/or the face value of the financial instrument is correlated with the value of the CFF financial obligations thus providing confidence that there are financial resources for repayment of the proposed financial instrument. Once a purchaser for the proposed financial instrument is found (that is, the terms of the financial instrument are settled), the financial instrument D can be created. The financial instrument might be a negotiable instrument or non-negotiable instrument. Examples are : cheques, letters of credit, tax refunds, promissory notes, IOUs or the like. In a preferred embodiment, the financial instrument D is a promissory note.

The investment proposal comprises the proposed financial instrument offered for purchase (including any terms of the financial instrument already set), along with other terms not forming part of the financial instrument per se, and any other relevant information that defines the offer or provides due diligence information for a

candidate/potential investor. The CFF entity investment proposal requests investment funding from candidate/potential investors on the basis of repayment being in accordance with the proposed financial instrument and the CFF having an interest in the CFF financial obligations. The investment proposal can also optionally request funding based on one or more of:

• the CFF funding entity having additional interests in the CFF financial obligations (such as a security interest) and/or interests over other assets of the TPFR,

• face value of the proposed financial instrument being correlated (not necessarily the same, but at least within a reasonable margin from a financial perspective) with the monetary value of the CFF financial obligations,

• repayment being guaranteed by the CFF funding entity,

• repayment being guaranteed by a third party guarantor,

• the successful investor being provided with a security over the set of CFF financial obligations, and/or

• the successful investor being provided with an option for receiving assignment of the CFF financial obligations, triggered based on, for example, liquidation of the CFF.

The fact that the CFF funding entity 12 has ownership in the CFF financial obligations assigned to it from the TPFR 10 provides the CFF entity a future source of cash flow (F) to meet its financial obligations to the investor when the financial instrument matures for payment. This is because the financial obligations of the TPFR debtors are paid

(assuming there is no default) from the original TPFR customers (debtors) direct F to the CFF funding entity due to assignment of the financial obligations (F) . This additional spread of credit risks, in addition to any security offered by the CFF entity boosted by security over non-assigned assets and undertakings, is a major benefit of the invention to potential the investors.

The Candidate/potential investors 13 can review the investment proposal and participate in a competitive process whereby they can each repeatedly bid a purchase price on the proposed financial instrument in the investment proposal offered by the CFF entity 12. The purchase price is or relates to what ultimately the wi nning investor will pay for the proposed financial instrument - that is, the monetary value of the funds they will transfer to the CFF entity 12 in exchange for receiving the face value of the proposed financial instrument at maturity of the financial instrument once it is created . The purchase price bid can be the actual monetary value the bidder proposes to pay or an indirect indication of it (from which the monetary value can be determined) such as an interest rate or yield desired or other discount on the face value (monetary value) of the financial instrument offered. The face value of the financial instrument D is what is paid back to the investor at the end of the term. The difference between the purchase price and the face value would be the premium (termed margin in figure 9) that the CFF funding entity would pay to the potential investor 13 in addition to repaying the purchase price of the financial instrument at the end of the term .

Through the competitive process, one of the candidate investors 13 wins the bidding, which finalises the purchase price, and determines who the payee for/purchaser of the financial instrument is - one of the terms of the proposed financial instrument.

Finalising the bidding settles the terms of the proposed financial instrument in question (with the other terms already being settled and forming part of the proposed financial instrument) with the CFF entity 12. The winning bidder becomes the successful bidder and investor 13, as they will purchase the proposed financial instrument D once created (at the purchase price). The transaction is formalised/finalised by creating the financial instrument in accordance with the settled terms of the proposed financial instrument by the CFF entity 12 and by the winning investor transferring the agreed purchase price E of the financial instrument to the CFF. Optionally, a guarantee may be arranged, such that the CFF funding entity will guarantee J repayment in accordance with the financial i nstrument. Also optionally, the CFF entity can arrange for a third party 14 to

i ndependently guarantee the repayment in accordance with the financial instrument on due date in favour of the investor (H) 14 of Figure 1. These guarantees will be over and above the obligations of the drawer who may be the CFF entity 12 and possible drawer and/or endorser of the financial instrument. The CFF entity 12 may enter into a performance guarantee (I) with the guaranteeing party 14 (H), however that is at the CFF entity's option and discretion. Optionally, the successful investor 13 can be provided with security over the set of CFF financial obligations, and/or the successful investor can be provided with an option for receiving assignment of the CFF financial obligations, triggered based on, for example, liquidation of the CFF.

If repayment does not occur in accordance with the financial instrument D, then in addition to any other legal recourse the investor has, they can pursue the CFF entity 12 and/or the third party guarantor 14 for repayment in the capacity of a guarantor of the investment. Where the CFF entity also allows security over the CFF financial obligations, if repayment does not occur in accordance with the financial instrument D, then in addition to any other legal recourse the investor has, the investor can redeem its security in the financial obligations to obtain the unpaid but promised funds. Where the CFF entity 12 also provides for assignment in the event of liquidation, if repayment does not occur in accordance with the financial instrument D, then in addition to any other legal recourse the investor has, the investor can demand assignment of the unpaid CFF financial obligations in an attempt to obtain the unpaid but promised funds. The investment proposal, competitive process, creating of a financial instrument and settling on terms results in an agreement and can take place in any suitable manner whether via electronic or using traditional business processes.

On creation of the financial instrument D, the successful candidate investor 13 will then transfer the price/funds E as governed by the financial instrument D to the CFF entity 12 so that it can carry out its business operations, such as fundi ng TPFR 10. The CFF funding entity will provide the physical financial instrument document D (or hold it in trust) to/for the candidate/potential investor if he/she or it becomes the successful bidder, at its request. The CFF entity 12 will then at the maturity of the financial instrument pay back G the face value of the financial instrument.

The fund acquisition by a CFF entity 12 can be carried out multiple times for the same or different TPFR 10 businesses with the same or different candidate investors 13, using any appropriate set of unique TPFR financial obligations in which an interest has been vested in the CFF funding entity.

In one possible embodiment, the proposal, competitive processes and settling

(agreement process) is undertaken in an online tender/auction process. One possible online tender/auction process is explained with reference to Figures 2 to 10. It is not essential that the invention is carried out according to this particular online process as described, and nor is it essential that it is carried out online at all . Other manual business processes for identifying investors and borrowing funds could be envisaged.

Referring to Figure 2, a system 22 for obtaining invoices/accounts receivable information from the TPFR 10 or associated party, processing them to create the financial instrument offering, and conducting an online tender/auction process is shown . The TPFR or associated party 10 have the relevant invoices/accounts receivable recorded in and administered by a suitable accounts system 21. While not essential, typically it will be an electronic system that comprises a database 21a and other required hardware/software. The TPFR or associated party 10 provide their invoices 22a-22c to the CFF 12 in any suitable way. This could be by physically printing invoices/accounts receivable and passing them 22a to the CFF entity 12. Alternatively, they could be transferred electronically via a suitable communications channel 22b or 22c - either via FTP, email, facsimile or via an upload to the CFF accounts system 23 - either directly or indirectly. The CFF entity 12 maintains its own accounts system 23 in any suitable manner. For example, the accounts system might be stored locally or remotely on a server 24 (such as a local server or remote server) for access by the CFF entity 12 via a suitable network 25 (such as a LAN in the case of a local server or the Internet for a remote server). The accounts system 23 comprises a database 23a or similar for storing accounts information and any other required hardware/software. The CFF entity 12 can access the server 24 (via the Internet or other network 25) using enterprise computer systems, such as PCs 12a . The server 23 can be operated/hosted by the CFF entity 12 or anybody else it authorises, or operated/hosted by a service provider; and it may be physically located remotely or in-house. Where the TPFR or associated party 10 provides physical invoices/accounts receivable 22a, then the CFF manually enters these onto its accounts system 23, using their enterprise computer systems 12a, to transfer the information to their accounts system 23. Where the TPFR or associated party 10 invoices/accounts receivable are transferred electronically 22b or 22c, then these could be transferred directly 22c or indirectly 22b to the CFF accounts system 23. For example, if email or facsimile is used 22b, the invoices/accounts receivable information is received at the CFF 12 and then transferred indirectly into their accounts system 23 via the enterprise computer systems 12 (with or without human intervention) . Alternatively, an upload could take place indirectly from the TPFR/associated party accounts system 21 to the accounts system 23 via the enterprise computer system 12a, or even directly 22c into the CFF accounts system 23 via a wide area network 26 such as the Internet from the TPFR/associated party accounts system 21. Any suitable means can be used to transfer invoices/accounts receivable, and those described are by way of example only and should not be considered limiting.

The same or a different server 24 can also be or comprise a web server 27 or similar and appropriate software to create the financial instrument proposal and conduct the online tender/auction. This web server (whether in the same or different server to the accounts system) can communicate with the CFF accounts system 23 and obtain information from it. In particular, the web server 27 can receive (uploaded) data from the CFF accounts system 23 relating to the invoices/accounts receivable and create the one or many investment proposals. Each can comprise details of the monetary value of the proposed financial instrument (relating to the funds required by the CFF entity), the set of financial obligations (in this example invoices) forming the basis of the proposed financial instrument, the term, any other repayment terms and/or any other required information. This information is stored on a database 27a forming part of or being separate to the server, the database itself being operated by any suitable entity either remotely or in- house. The web server 27 can receive multiple different fund request proposals, optionally from multiple different funding entities.

Candidate/potential investors 13 can access the web server 27 via the Internet or other suitable network 29 using a PC 13a and browse investment proposals (see Figure 11) that are hosted on the web server 27, and identify those of interest by viewing the repayment terms and other details, including risk analysis data, of the proposal . When a candidate investor 13 identifies an investment proposal of interest, they can participate in a competitive process (being an auction/tender) whereby they can offer their proposed purchase price for the proposed financial instrument associated with the investment proposal . In the preferred embodiment the purchase price is a function of yield% pa, but that is not essential . Once the tender/auction process is complete (e.g. after an agreed elapsed time), the terms of the proposed financial instrument are settled based on the original terms and conditions of the offer of the investment proposal to purchase the financial instrument and the purchase price proposed by the successful investor. The successful candidate 13 and CFF entity 12 then arrange the financial instrument (D), along with (optionally) a security, assignment, and/or guarantee(s), if any 14, as required using the computer system and/or traditional business and legal processes. Many investment proposals (comprising proposed financial instruments for purchase) may be offered for sale by the CFF entity 12 at any time (each relating to funds required by the CFF to fund its business) so that many competitive processes may be running at any one time. These competitive processes may be entered into by many candidate investors at once, each relating to an investment proposal backed by d ifferent financial obligations. It is possible that the tender/auction process could contain investment proposals from more than one CFF entity 12.

A possible (non-limiting) embodiment of a tender/auction process is described with reference to Figures 3 to 10. Figure 3 shows a flow diagram of the process, while Figures 7 onwards show screen shots of the tender/auction process. It will be appreciated that while the tender/auction process takes place on an online computer system, not necessarily all aspects of the entire process occur online, nor by computer.

First, step 30, a CFF entity 12 receives an approach from a TPFR 10 (such as an SME) that requires working capital (or other funding) and has financial obligations (in this case numerous invoices) that they can assign (or otherwise provide an interest in) to the CFF entity in return for receiving the required funding . The CFF funding entity and the TPFR will agree on the appropriate monetary value of the working capital advance facility, usually a percentage of the financial obligations assigned to the CFF, step 31. The funding terms will be agreed between TPFR and CFF, step 31. The parties will then arrange the interest for the CFF entity in the TPFR financial obligations (invoices), be it an assignment or other interest, such as a security, step 31. The TPFR financial obligations then become financial obligations owed to the CFF (now called "CFF financial obligations). The parties will also arrange any additional interest the CFF requires, such as a security over the assigned financial obligations and/or a security over both the assets and undertakings of the TPFR as it sees fit to secure it, step 31. In this example, the financial obligations to be assigned by the TPFR are invoices representing accounts receivable and will be assigned to the CFF funding entity, such that all debtor payments of invoices will go directly to the CFF funding entity. The CFF can then release funds for the TPFR. For example, as shown in Figures 4 to 6 in batch 64127, $12,987.63 of invoices were assigned to the CFF funding entity, and $9,652.60 can be released as funding from the CFF funding entity to the TPFR as working capital after costs and margins, etc. The batch documentation also includes all details of the invoices that have been assigned to the CFF entity from the TPFR as shown in figure 5, 6 which forms part of the CFF entity's modus operandi to provide funding to the TPFR. (note, each entry relates to a debtor/customer, but details have been obscured for privacy). The CFF entity 12 decides whether it can fund the TPFR through its existing resources, such as capital, lines of credit, and loans, or whether it needs to seek funds from investors in accordance with the present invention, step 32. The CFF might provide the funds to the TPFR from its own resources as a temporary measure, before reverting to obtaining funds from investors in accordance with the present invention. Alternatively, the CFF entity 12 might wait to obtain funds from investors before providing funds to the TPFR 10. Any suitable alternative can be implemented also.

If the CFF entity 12 needs to source funding itself to provide the working capital funding to the TPFR, step 32, it needs to create a proposed financial instrument based on the CFF financial obligations that it can offer for purchase to candidate investors. To do so, the CFF entity 12 collates the required information, along with arranging the required background legal and financial preparatory work, step 33. This includes bundling the invoices (CFF financial obligations) that have been assigned to it by the TPFR (see Figures 4, 5 and 6) to form the basis of a proposed financial instrument capable of being sold to an investor to procure the required funds. The batch obtains a unique number batch #64172. In this case, the bundle is invoices (which might be all or some of the invoices assigned from the TPFR ), but in an alternative it could be the entire Accounts Receivable (of one, some or all customers) of the TPFR that were assigned. An investment proposal is created comprising the proposed financial instrument to be offered for purchase, step 32. The proposed financial instrument is created based on the bundle invoices. The investment proposal details the "bundle" of financial obligations (in this case invoices batch #64172) that support the proposed financial instrument, in this example a proposed promissory note # 64172. Figure 7 shows the "transformation" from batch #64172 to promissory note #64172 and summary information for the proposed promissory note. It should be noted that there is a difference between batch #64172 (Figure 4 to 6) and P/N #64172 (Figure 7 to 9) . Batch 64172 details the transaction as it is represented in the books of the CFF entity and provider of funding to third party borrowers. The CFF entity 12 has to fund this. Having elected to fund this via investors, the CFF "converts" the interest in the assigned invoices in batch 64172 to a proposed financial instrument 64172 or in the example a proposed promissory note (P/N) 64172. This is a separate and independent transaction to that involving the funding of the TPFR by the CFF entity and starts the preparation of the tender/auction process of financial instruments

Referring to Figure 7 and 8, the CFF entity transfers to the system 27 all the investment proposal information and detail (about the respective invoices in Batch 64172 "converted to" P/N 64172), step 34. The following information is collated and uploaded to the server, (which examples a particular offer of a financial instrument proposal relating to Promissory Note # 64172 shown in the Figure 7 and 8 screenshot) :

• Monetary face value and make up of financial instrument - in this case being promissory note #64172 with a face value (repayment value) of

$ 10,390.00 Monetary value of the set of CFF financial obligations. This among other things becomes the security value for the financial instrument P/N - $12,987.63

• Initial security margin, being the difference between the monetary value of the CFF financial obligations and the face value of the financial instrument - $2,597.63.

• Initial security cover percentage which is the percentage of the monetary value of the financial instrument (Security Value) to the face value of the same financial instrument as a security value - 125%

· Term of investment - 90 days or as indicated

• Maturity date of loan - 29 March 2013 or as indicated

• Drawer - CFF entity or as nominated

• Guarantor as nominated from time to time, and if any

• Buy now yield% - 4.5% or as nominated from time to time • Number of individual financial obligations and hence spread of risk, in thi case invoices in the set of financial obligations - 39 separate invoices

• Number of individual and separate debtors in set of financial obligations (that is the 39 invoices are owed by 27 separate debtors)

• Average invoice value - $333.02.

• List of financial obligations (invoices in this case) that back the financial instrument PN 64172

• Average historical payment in days showing trend of days taken for previous financial instruments tendered by the CFF entity for this TPFR - 36 days

• Information for d rawer CFF entity

The above information is illustrative only, and other information could be provided .

This information, which forms due diligence information for a potential/candidate investo 13 that might want to purchase the proposed financial instrument PN#64172, is uploaded to the server 27 and is displayed as an investment proposal, as shown in the Figures 7 and 8 screen shot, step 34. The proposal is an offer to purchase proposed financial instrument PN#64172 on the basis of repayment being in accordance with the proposed financial instrument and the CFF entity having an interest in the CFF financial obligations. The investment proposal offer can also optionally be based on one or more of:

• repayment being guaranteed by the CFF funding entity,

• repayment being guaranteed by a third party guarantor,

• the successful investor being provided with an option for receiving assignment of the CFF financial obligations, triggered based on, for example, liquidation of the CFF. If a candidate investor wants, they can review this information. (Note, a large number of investment proposals (containing proposed financial instruments) might be available for review and might be provided on a summary screen (see Figure 11) that a potential investor can review to identify those of possible interest, step 35).

If, after reviewing the information, any candidate/potential investors has interest in purchasing a proposed financial instrument with the noted face value, they can bid/put in a tender in a competitive process with other candidate/potential investors, step 36. Their desire to participate will be based on any suitable consideration including : a) their analysis of the due diligence information in the proposal (including their analysis of the creditworthiness of the set of financial obligations and the CFF entity 12 behind the proposal), and the features noted above; and b) the return or yield% pa they are prepared to earn on the funds invested.

The tender/auction preferably takes the form of an offer by bid/tender to invest at a yield% pa on the funds invested to buy the proposed promissory note that is acceptable to the investor. In this example, the purchase price takes the form of a yield% pa earned by the investor on the funds invested. The monetary value of the winning bid and the respective yield is deducted from the face value of the proposed financial instrument (P/N) to give the investment sum or Buy Price (purchase price) . The yield and margin is the difference between the Face Value of the financial instrument and the agreed Buy

Price. It is this amount in monetary terms that represents the successful yield on the buy price (money outlaid by investor) to the investor. This is called the "margin" and when added to the Buy Price is equal to the face value of the financial instrument to be paid on the scheduled settlement and noted date of maturity of the financial instrument. The screen in Figure 7 provides an example of the functionality a candidate/potential investor can use to bid/tender on the proposed financial instrument. As part of this, the funding entity provides a closing date for the tender/auction, a starting bid (in this case a yield of 7.25 %pa) and a "buy now" bid of (4.5%pa) . If the "buy now" yield is bid by a candidate investor this will make them instantly successful and the tender/auction process will close. A reserve yield% pa can be provided, or as in this case, there might be no reserve. Therefore, candidate investors will bid the particular yield percentage that they are willing to lend money at, by entering this in the "next yield %" field. The current bid (current wining yield %) is shown in Figure 7 as 6.47% pa. Competitive bids are invited and the next suggested bid being 6.46% pa ready to be entered, is shown. It should be noted that the bid of 6.46% pa may be changed to any number, at the candidate investor's discretion, that the candidate considers appropriate to win the auction. The monetary value of the requested funds ($10,227.09) is shown along with the margin which is the interest that will be owed if the bid of 6.47% pa remains as the leading and the winning one. The new Buy Price and margin is automatically calculated on the placing of a new bid. The bid can be placed by clicking the "place bid" button. Previous yield bids can be seen and the trend noted by the candidate, the starting point "House Bid" in this example being 7.5% pa. A "buy now" percentage could be provided also which if entered by a candidate investor will make them wi n the tender instantly.

Otherwise the tender has to continue until the close date is reached (or optionally until the buy now margin/percentage is reached), as noted by the CFF entity in the offer terms and conditions. While the bid can be placed in terms of a yield % pa, it could be entered as a margin % or a buy price in $. In this case, the other fields are

automatically calculated.

It should be noted that additional information is made available to assist the investor in comparing the CFF offering . Figure 7 displays the competitive yields and interest rates that are available from similarly perceived rated secured investments in the market place. This information is updated regularly. Similarly the "Bid History" pertaining to the subject offer is noted for all bidders and interested parties and the details of the winning bidder (bottom Figure 8) are noted but only to the respective bidder and the CFF. In the example the winning bid is 6.47% pa and the bidder is Terry621.

The tender/auction continues and each candidate investor can make additional bids if their previous one is out-bid, step 37. Figure 7 shows a history of bids. Once the tender/auction closes, or a "buy now" bid is tended then the tender/auction will cease, step 38. If the tender/auction runs the course, the winning tenderer/successful investor will be the one that offered the lowest yield% pa (that is, the highest purchase price) to buy the proposed financial instrument, in this case PN #64172. The winning tender details are shown in Figure 9 and in the example PN #64172. The completion of the tender/auction results in settling of repayment terms between the investor and the CFF entity. In this case, the 6.47% bid was the winning one. The buy price (that is, monetary value of the investment/funds being invested by the winning candidate) must be transferred by the date and time noted for the transaction to be complete.

Upon the tender closing, the proposed financial instrument will actually be created (in accordance with the settled terms), step 39, between the CFF funding entity and the investor. This financial instrument will govern and confirm repayment details as well as the date for payment from the CFF entity to the investor. There will be a fixed date for repayment /settlement noted in the financial instrument at the time the offer is made in most cases. However, in some cases a moving settlement date may be a function of the invention. In this example, a financial instrument in the form of a promissory note is created/arranged . The promissory note comprises relevant repayment terms in accordance with the proposal and/or successful bid/tender, such : • The CFF entity or nominated nominee drawer

• The investor/payee

• The payment/settlement value (being the monetary value of the invested funds plus the yield or other cost of lending or the face value of the negotiable instrument)

• The maturity date for payment (term)

The financial instrument might comprise further information, or not all of the information above. Possibly, only the bare minimum information required to create a legal and binding financial instrument might be included.

Upon the tender/auction closing, one or more guarantee(s) and/or security may be arranged, steps 40, 41, if these were terms of the investment proposal. The buy price is transferred from the winning candidate investor to the CFF funding entity, step 42. On completion of the promissory note term (in the example 90 days and on the 28/12/2012 figure 9), the CFF funding entity will repay the promissory note face value, step 43, which includes the original monetary value invested by the candidate plus the monetary value of the yield (in this case, $ 10,226.85 plus $163.15 (yield of 6.47%pa) for a total of $10,390) . If for any reason the promissory note is not honoured, the investor will be able to pursue the CFF entity and/or the guarantor (if a term of the offer) for restitution through any security provided by the financial obligations (e.g. the investor could have the financial obligations assigned to them and receive payment directly) and/or they can pursue the guarantee provided by the funding entity. Other legal avenues of recourse are available to them also. During the term that the financial instrument is live (in this example promissory note #64172), the successful investor will be able to view details relating to the assigned TPFR financial obligations, including their progress of payments (see Figure 9A) and particularly the security margin protecting the investors investment. There is an entry for each customer, but details are obscured for privacy. See for example Figure 10.

There are many possible variations to the embodiments described above. The various stages/actions, including although not limited to, the third party request, transfer of working capital funding, the proposal, competitive process, transfer of investment funds, arrangement of guarantee, security and financial instrument, and repayment/settlement, could take place in any suitable order, and not necessarily the order described above or set out in the claims. For example, the CFF entity 12 might initiate the proposal and i nvestment process before completing working capital funds transfer and/or assignment of financial obligations, or they might happen almost simultaneously or dependent on each other. Variations are possible. While the embodi ments relate to CFF entity 12, this is not essential . Any business could use this process, utilising their clients'/customers', other third party (or even their own) accounts receivable/invoices to create a set of financial obligations on which a investment vehicle (like a financial instrument although not limited to that), can be based (see Figure 12). Assets and undertakings could also be used as a basis for an investment vehicle. The CFF entity 12 can obtain the investment funds to fund its business and these funds may be used to fund a TPFR other than the business whose financial obligations have been used to secure the respective offer of a financial instrument for sale. For example, see Figure 13, where the financial obligations of a party associated with/related to the TPFR are used . That is, the CFF entity 12 funds a TPFR, but takes an interest in the financial obligations owed to a different party that is somehow associated with the TPFR. Similarly, another form of consideration might flow from the CFF entity 12 to the business providing the interest in their invoices/accounts receivable and/or other assets and undertakings. Where monetary consideration is transferred, this will typically be an outright payment either direct to the TPFR (perhaps with a drawdown facility) or to a third party creditor or it could be an advance itself. Any variation where bundling of invoices/accounts receivable (or other financial obligations) is used as a basis to raise, borrow or acquire other money to fund a business using a financial instrument could be used. The embodiments described also allow investors to watch progress of debtor payments. It will be appreciated that the description for the main embodiment could equally apply, with the appropriate modification, to any of the variations described above, such as those shown in Figures 12 or 13. For example, where the financial obligations come from an associated party- references to TPFR in relation to financial obligations, assets and undertakings could be references to that associated party. Furthermore, while a financial instrument is described herein, the process could be used for any sort of investment vehicle.

Financial instrument covers both negotiable and non-negotiable instruments, although financial instrument and negotiable instrument can be interchangeable terms. The invention covers the preparation for sale of both negotiable and non-negotiable financial instruments, or even other investment vehicles.

An investor can be an individual or institution or other entity. It is not essential that the financial instrument is offered for purchase in an auction/tender process, or even a competitive process at all . Referring to Figure 3, in an example of an alternative embodiment, a private placement is arranged whereby sale of a financial instrument is negotiated directly with an investor, such as an investment institution or similar. In this case, once the investment proposal is created comprising a proposed financial i nstrument, step 33, rather than uploading it to an auction/tender system, the CFF entity 12 can choose private placement, step 33a, and the investment proposal is conveyed to the private placement investor, step 34a. This could be via any suitable means, e.g. by physical transfer or by providing it electronically, such as on a website or via email, facsimile or similar. The mode of conveyance might be influenced by how contact is made between the private placement investor and the CFF. For example, if the private placement investor approaches the CFF (or vice versa, e.g. by the CFF advertising to, soliciting or contacting a possible investor directly) then conveyance could be (although not necessarily) made by a direct communication method such as facsimile, email or direct contact. Alternatively, the CFF could solicit or advertise to a private placement investor by uploading the investment proposal to a website and requesting those interested to contact them via a suitable method. Those skilled in the art will appreciate other forms of conveyance and contact are possible. Once the CFF and a private placement investor have made contact and the investment proposal has been conveyed (which could happen in any order), then the parties privately negotiate the purchase price for the financial instrument, step 38a. Once that is done, the process then continues in the same way as described for the competitive process embodiment - including creating the financial instrument, arranging guarantees and/or additional securities, transferring the buy price and repaying the financial instrument, steps 39-43. In yet a further variation, the CFF entity 12 might make a "bespoke" investment proposal for the investor. That is, they can ascertain the level of funds the investor wants to invest, and create and investment proposal with a financial instrument with a face value/buy price (and other parameters) that correlates with the desired level of funds the investor wants to invest. In this case, contact with the investor could be made before and investment proposal is created .

Claims

WHAT WE CLAIM IS:

1. A method of funding an entity comprising the entity:

seeking funds from an investor on the basis of:

the entity having an interest in the financial obligations, and

repayment being in accordance with a financial instrument.

2. A method according to claim 1 wherein the funds are sought on the further basis of:

3. A method according to claim 1 or 2 wherein the interest is at least assignment of the financial obligations and optionally the entity further receives one or more of:

4. A method according to any one of claims 1 to 3 wherein seeking funds from an investor are further on the basis of one or more of:

the entity having a security over the financial obligations,

repayment being guaranteed by the entity,

repayment being guaranteed by a third party guarantor,

the investor acquiring a security over the financial obligations, and/or

the investor having the right of assignment of the financial obligations.

5. A method according to any one of claims 1 to 4 wherein seeking funds from the investor comprises the entity:

receiving the purchase price from the investor.

6. A method according to claim 5 further comprising the entity doing one or more of: providing a repayment guarantee to the investor,

7. A method according to any preceding claim wherein the financial instrument is one of:

• a promissory note

• a cheque

• a letter of credit

• tax refund

• IOU

• Bill of exchange

• Or any other known or new financial instrument.

8. A method according to any one of claims 3 to 7 wherein determining a purchase price comprises :

9. A method according to any preceding claim wherein the financial obligations are: some or all of the accounts receivable of the third party or associated party, or one or more outstanding invoices issued by the third party or associated party to its debtors.

10. A method according to any one of claims 1 to 9 comprising repaying the funds to the investor in accordance with the repayment terms of the financial instrument.

11. A method according to any one of claims 3 to 10 wherein determining a purchase price occurs:

on an online auction or tender,

or by direct negotiation, such as in a private placement.

12. A method according to any one of claims 3 to 10 wherein determining a purchase price occurs on an online auction or tender wherein the entity offers the financial instrument for purchase on the online auction or tender and receives via the online auction or tender purchase price from the investor using the online auction or tender.

13. A method according to any one of claims 5 to 12 wherein during the term of the financial instrument the entity provides details of the financial obligations so that the investor can monitor payment progress of the financial obligations.

14. A method according to any one of claims 1 to 13 wherein the entity is a CFF funding entity and provides working capital funds as the consideration, wherein the sought funds are used to provided the working capital funds to the third party entity for its business operation.

15. A method of funding a CFF funding entity or other business comprising acquiring the investment funds of investors on the basis of financial instruments that are created and performed by the bundling or single allocation of assets and undertakings including the assignment of invoices and/or accounts receivable that are sourced from third party clients who assign invoices and/or accounts receivable and/or give a security interest in any assets and undertakings in exchange for the funding from the CFF funding entity.

16. A method of funding a business comprising acquiring funds from an investor on the basis of the business having an interest in a set of financial obligations owed to the business or a third party (or party associated to the third party), wherein acquisition of the funds is in accordance with a financial instrument.

17. A method of funding an entity comprising the entity:

receiving an interest in a set of financial obligations owed to a third party (or party associated with the third party) in return for consideration to that third party, offering a proposed financial instrument for purchase on the basis that the entity has an interest in the set of financial obligations so can honour the financial instrument.

18. A system for obtaining funding for an entity comprising :

a server with an accounts system and an auction/tender system,

the entity having an interest in the financial obligations, and repayment being in accordance with a financial instrument.

19. A system according to claim 18 wherein the funds are sought on the further basis of:

20. A system according to claim 18 or 19 wherein the interest is at least assignment of the financial obligations and optionally the entity has further received one or more of: a security over the financial obligations owed to the third party or associated party,

21. A system according to any one of claims 18 to 20 wherein seeking funds from an investor are further on the basis of one or more of:

the entity having a security over the financial obligations,

repayment being guaranteed by the entity,

repayment being guaranteed by a third party guarantor,

the investor acquiring a security over the financial obligations, and/or

the investor having the right of assignment of the financial obligations.

22. A system according to any one of claims 19 to 21 wherein seeking funds from the investor comprises the competitive process:

23. A system according to any one of claims 19 to 22 wherein the financial instrument is one of:

a promissory note

a cheque

a letter of credit

tax refund

• IOU

Bill of exchange

Or any other known or new financial instrument.

24. A system according to any one of claims 20 to 23 wherein determining a purchase price comprises :

offering the proposed financial instrument for purchase on the tender/auctions system, the proposed financial instrument having at least a face (repayment) value and a term for repayment,

receiving on the tender/auction system from one or more investors an offer of a purchase price to purchase the financial instrument through a competitive process,

25. A system according to any one of claims 18 to 24 wherein the financial obligations are :

26. A system according to any one of claims 18 to 25 wherein during the term of the financial instrument the tender/auction system provides details of the financial obligations so that the investor can monitor payment progress of the financial obligations.

27. A system for obtaining funding for an entity comprising a server with an auction/tender system for:

offering a proposed financial instrument for purchase on the basis that the entity has an interest in a set of financial obligations so can honour the financial instrument.