Fundbox, a startup that helps SMBs improve cash flow from clients, has raised $17.5 million in funding led by Khosla Ventures with SV Angel, Vikram Pandit, former CEO of Citigroup; Tom Glocer, former CEO of Thomson Reuters; Jay Mandelbaum, former Head of Strategy and Business Development for JP Morgan Chase; Emil Michael, SVP of Business at Uber, and other investors participating.
Fundbox wants to solves a simple problem many small businesses in the B2B space face-cash flow from client payout. Most business owners have customer invoices that may take 60-90+ days to get paid. Having to wait that long to clear those invoices puts a strain on their working capital. Fundbox lets small business owners choose invoices they want paid out, and Fundbox puts the money in their account the next day. Fundbox is focused on B2B businesses (companies that invoice for goods or services) rather than B2C businesses (with a point of sale)
Using Fundbox, a small business owner or bookkeeper connects with their accounting and bookkeeping apps, including Quickbooks, Xero, or Freshbooks, and the Fundbox risk engine assesses the customer’s network and invoices for risk automatically and instantly. The user can then view all outstanding invoices through their Fundbox account and choose which invoices to clear.
The company will actually loan the company the amount for the invoice so that the startup can continue paying its bills despite having to wait for the client check. Fundbox will evaluate data around the company’s financial health, the demographics of their customers, and even the seasonal nature of some specific businesses to determine whether to loan the money. Money for funded invoices is transferred to the user’s bank account the next business day. The business is charged fees for the amount loaned, which range between sub-1 percent and three percent. The ideal customer pays back the amount once they get paid by the client. Fundbox rewards customers who receive funds and repay them early, with refunds for early repayment and lower fees the more they use the product.
While the company has been operating in stealth since August 2013, the startup has signed up thousands of active users (small businesses), and clears tens of thousands of invoices daily for businesses in 42 states.
The technology behind Fundbox is their data-driven SMB risk engine, which takes a large amount of data points and builds a better picture of the company’s overall health and likelihood of repayment. It takes 50 seconds to run, and includes no human bias or error, says the company.
There a number of companies that are approaching the small business lending space including Kabbage, OnDeck, CAN and now Lending Club. Even Square is starting to provide working capital to merchants. Fundbox’s take is interesting because it actually connects the invoice to the loan, which can be useful for small businesses.