Fundbox, a company that loans businesses money for outstanding invoice payments, has raised $40 million to grow its own business in the trillion-dollar alternative lending market.
The Series B round was led by General Catalyst with participation from NyCa Investment Partners and help from existing backers Khosla Ventures, Shlomo Kramer and Blumberg Capital.
If a small business owner needs growth capital to open a new store or purchase inventory, tech-enabled services such as OnDeck or Lending Club provide a quicker and cheaper alternative to the traditional big bank loan. But the primary strain on a small business is the more monotonous task of managing cash flow and recurring expenses.
Fundbox provides short-term loans so businesses can keep up with expenses while they’re waiting the 30, 60, or 90 days it typically takes for invoices to be paid.
“There’s an increasing trend that invoices actually get paid over longer and longer periods of time, and cash flow management is now the number one reason these businesses go out of business,” says Hemant Taneja of General Catalyst, who is joining Fundbox’s Board of Directors.
Fundbox isn’t the first startup to identify a problem in the B2B payment process — Tradeshift and Taulia have raised a combined $200 million in venture funding to move invoices into the cloud.
Fundbox plugs into the existing accounting software a small business is using and analyzes a variety of data points to build a risk profile for each invoice. One company’s account receivable is another’s account payable, so Fundbox looks at both sides of the equation to assess risk.
An artisan coffee roaster, for instance, probably provides coffee beans to a handful of trendy coffee shops in San Francisco. Fundbox considers the credibility of both the coffee roaster and the coffee shop paying the invoice when determining risk, so the small roaster benefits from the good track record its buyer has already established.
Founder and CEO Eyal Shinar says it takes 15 seconds to create an account and 50 seconds for Fundbox to underwrite an invoice. Customers see the money in their account the next business day, and they’re rewarded if they pay back the loan before the invoice is due.
Fundbox is currently powering tens of thousands of small businesses in the U.S. and advancing thousands of invoices weekly, ranging from $100 to $25,000 each. Shinar says Fundbox has surpassed 300% quarter over quarter growth in the past 18 months, and he plans to use the latest influx of cash to pick up the pace.
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