BillFloat, a San Francisco-based startup that helps consumers pay their monthly service bills and avoid those pesky late fees and overdraft charges, announced today that it raised $21 million in new funding from Investor Growth Capital (IGC), with participation from Bronze Investments and previous investors Venrock, FirstRound Capital and Baseline Ventures. The new round brings the company’s total funding to $37 million and sees IGC Vice President Brian Mulvey and Bronze Managing Partner Stephen DeBerry join BillFloat Co-founders Ryan Gilbert and Sean O’Malley on the startup’s board of directors.
Founded in 2009 and incubated by PayPal, BillFloat is on a mission to bring a fresh solution to a familiar problem: What to do when deadlines arrive but you can’t pay your bills. Rather than turning to friends and loved ones, payday lenders, high-interest bank loans or the stone-wall approach (which leads to lower credit, late fees and termination, BillFloat pays your bills automatically, giving you more time to get your finances in order.
The payment solution offers loans of up to $200, sending the money directly to billers, deducting the amount from your bank account 30 days after the bill is paid. To join, all you need is a bank account, no credit history is necessary, as the startup employs its own “decision engine” to determine qualified applicants.
As to how it works? Users sign up for free, entering their billing name and bank account information along with the amount that needs to be paid. Users can then choose standard (5 to 7 days), guaranteed (4 days or money back) or rush payment (same day) processing, at which point BillFloat pays your bill for you. Payment is then reflected in your account, and 30 days later it deducts the bill total from your connected bank account.
Of course, this convenience comes at a price, as BillFloat charges a service fee and interest on each payment, the amount of which varies depending on the state. For California, for example, interest is about 10 percent APR, while processing fees can be as high as $21 depending on the cost of your bill and the speed at which you request payment, with late fees at $10 a pop. While that may sound high, BillFloat says that it averages about 58 percent savings compared to the average high-interest loan and rush-payment services.
To provide consumers with instant financing and credit delivery services, the startup has partnered with over 2,500 billers, including car financing, cable companies, insurers, wireless carriers, utility providers and eTailers. In turn, these companies use BillFloat to avoid bill collection hassles, allows them to get paid on time and reduce risk, while making its service available on their websites.
On that note, the big draw for investors has been BillFloat’s new “More-Time-To-Pay” platform, which connects lenders and service providers, allowing them to integrate the startup’s instant financing solutions online, in-store or via mobile devices, along with tapping into a handful of other products.
BillFloat currently has 700K registered users, and with its new round of funding secured, plans to provide more than $400 million in credit delivery by the end of this year. With consumer debt on the rise, there’s a growing demand for credit alternatives that break away from the FICO score-reliant traditional lending models.
By eschewing credit checks, and offering expedited payment services that are relatively affordable and cover a huge range of service providers, BillFloat makes it pretty easy to avoid penalties when cash is tight. But there’s also plenty of inherent risk to becoming too reliant on a third-party service to float your bills and get you out of trouble, which can lead to some counterproductive financial habits.
Nonetheless, there’s plenty of growth opportunity for BillFloat in licensing its technology to banks and other traditional lenders, while keeping average Joes like you and me from being overwhelmed by debt.
For more, find BillFloat at home here.