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Editor’s Note: This story first appeared on Small Business Nation.
Welcome back to Small Business Nation’s Small Business Spotlight series, where we profile innovative small businesses and startups across the country and identify lessons from their operations, strategies, and growth.
Our newest profile takes a look at Fundbox, a San Francisco-based alternative financing startup that leverages deep data analytics to accelerate cash flow and clear invoices for small businesses. Fundbox allows owners to get advances instantly and securely in the exact amount of each invoice, instead of waiting the normal 30, 60, or 90 days to get paid.
Fundbox has emerged as a leader in the financial technology ecosystem. Unlike traditional lenders that rely on FICO scores and credit scores to assess business creditworthiness, Fundbox plugs into a company’s existing accounting software and reviews each invoice individually. If approved, deposits are made into the company’s account before the end of the next business day.
We spoke to Fundbox’s Founder and CEO, Eyal Shinar, about small business cash flow, client data security, and the potential for further fintech disruption.
Can you briefly explain to our readers what Fundbox does and how it could benefit their business or startup?
Cash flow gaps are the biggest challenge facing small businesses today. According to a U.S. Bank study, 82% of small businesses (SMBs) fail due to poor cash flow management. Fundbox solves this major pain point by improving business owners’ ability to plan ahead and by eliminating the financial uncertainty associated with having unpaid invoices. Fundbox helps SMBs overcome cash flow gaps and get paid instantly on invoices awaiting payment.
SMB is obviously a broad category—who are your main users within this category?
Fundbox focuses mostly on the B2B space where companies use invoices as the primary way of collecting for goods or services rendered. Fundbox appeals to a variety of other SMBs, including those involved in construction and landscaping.
What information does Fundbox require from small businesses to create an account and receive credit?
It takes only five pieces of information to get started with Fundbox, including syncing your accounting or invoicing system to the platform. Fundbox can underwrite a business with as little as three months of history and deliver a decision in less than three hours. Customers approved for Fundbox Credit then have access for up to $100,000.
What indicators does Fundbox look for when assessing creditworthiness? Do you consider business or personal credit scores?
Fundbox’s proprietary technology looks at a wide variety of information to make a decision on each individual business. Fundbox does not use traditional decision-making tools, such as FICO.
Security is always a concern when you’re allowing a third party access to financial information—particularly customer or client-related financial information.
What steps does Fundbox take to secure data?
Fundbox leverages bank-grade security, including the most cutting-edge and sophisticated methods to ensure every transaction is secure, in order to protect our clients’ data. Security is our highest priority.
You’ve examined invoices from tens of thousands of SMBs. What does that data tell you about the financial challenges facing SMBs?
A study of more than 20 million Fundbox invoices revealed the widespread problem of late payments on SMB’s invoices. 64% of SMBs are affected by late payments on open invoices, a value totaling to more than $26 billion. This underscores the market demand of invoice financing technology for SMB owners.
Will your B2B model translate to B2C? Is that something you’re considering in the future?
Right now, Fundbox is focused on B2B businesses (companies that invoice for goods or services) rather than B2C businesses (with a point of sale). We are solving a critical problem uniquely in this massive market. The B2B payments space is approximately $74 trillion annually, a much bigger market than the $3 trillion B2C market.
Why are financial technology-related startups having such a moment right now? And how will fintech disrupt financial services in the years ahead?
There is a huge need for disruption in the financial services industry. For years, banks have been slow to leverage technology to benefit their customers or prospective customers. FinTech startups have invested in technology and have fundamentally helped to transform how people bank, secure capital to run their business, and simplify daily life. In the future, fintech will continue to improve everyday life by providing more customer-centric solutions. At Fundbox, we will continue to simplify the lives of SMB owners by providing them with easy access to credit-on-demand.
Company Name: Fundbox
Location: HQ in San Francisco with an office in Tel Aviv
Number of Employees: 60
For more small business insights and profiles, check out the Small Business Nation blog.