Small businesses often have a difficult time getting the financing they need when they need it. Fundbox is tackling this issue with a new line of credit solution, Fundbox Fuse. I spoke with Joanna Knox , Business Development Manager, Channel Platform, to learn how Fundbox is partnering with small business solutions vendors to streamline access to short-term financing for small businesses.
Laurie: Joanna, can you provide some corporate background about Fundbox to get started?
Joanna: Sure. Fundbox provides lines of working capital to small business owners based solely on the information on the health of their business, not dependent on FICO. The hypothesis for Fundbox is to provide a better way to underwrite and provide capital for small business owners than the traditional system offers. We’ve made deep investments into machine learning and AI. The company was founded in Tel Aviv, and our headquarters is now in San Francisco. We have about 160 employees worldwide.
Laurie: Thanks. So you’ve just announced a new offering, Fundbox Fuse. What was the impetus for this solution?
Joanna: Fundbox Fuse is a lightweight integration that our solution partners can integrate into their platforms to provide their small business users with seamless access to financing. We’ve done deep data integrations before with Intuit QuickBooks and FreshBooks, but this is a lighter-weight option—just three lines of code—that any small business solution vendor can easily embed into workflows that their small business customers use every day.
Laurie: Can you give me an example?
Joanna: Jobber, one of our partners, is a really good example. The typical Jobber customer is in Jobber every single day scheduling jobs, working on jobs, doing payroll. The usually use Intuit QuickBooks for accounting, but they do all of these other business functions through their Jobber Management System, and they’re in that more often than QuickBooks. So Jobber can use Fundbox Fuse to provide them with access to a capital when they need it, without interrupting their workflow. It simplifies the process for the small business owner who wears multiple hats.
Laurie: And there are so many applications that small businesses use, so you wanted to open up a financing option to a bigger partner universe?
Joanna: Yes, by extending that ability for small businesses to apply for credit when and where they need it the most.
Laurie: How does the financing process work?
Joanna: I’ll use the example of our partner Knowify, which provides a solution for commercial subcontractors. Within your Knowify dashboard, you click a button that says build capital. When you click that button, a side panel pops out, and you enter about five pieces of information, pick a password, and then select a data source to underwrite the line of credit. We can underwrite in one of two ways, either through your business accounting platform or a general ledger that we sync with, based on a business bank account. After you enter the data, it goes through the Fundbox algorithm, and it delivers an initial funding decision—all without any human intervention. The median approval time is less than a minute, because the decision is completely automated. And, the user never leaves the Knowify platform.
Fundbox is completely usage-based. Our line of capital is meant for short-term business needs. An example might be a business owner that needs to pay some overtime and they invoice on term, so there’s a crunch in paying overtime until the business gets paid. That’s a good use for Fundbox. Our terms are 12 or 24 weeks depending on the product. Most of our customers don’t take that long to pay back and, because our fees are usage based, if they repay Fundbox early they only pay fees for the period of time that they’re using it.
Laurie: What about fees or interest rates?
Joanna: We typically compare our service to an advance. we charge is a fee, not an annual rate. The maximum amount of time you can keep a line of credit open is 24 weeks. This is comparable to what small business owners call bank fees, what you and I would call overdraft protection. But with a bank, the advance is front-loaded. Banks typically charge small businesses $35 for overdrafts, regardless of the size the transaction. Our fee is based on the limit that we set for the business owner and on how long they’re using the line of credit.
If we provide a business owner with a $1,000 advance, they would pay us in twelve equal weekly payments, debited from the same account that we deposited the money into. Those equal weekly payments will be about $90-$91. $83.33 of that goes directly back to the principle, and only about $7.00 of it is the fee. There is no penalty for pre-payment. So, if they pay it back in couple of weeks, it would cost them about $14, or less than a credit card swipe.
Laurie: Who provides the actual financing?
Joanna: We have a banking partner, First Electronic Bank, and we also have a partner that provides us with debt financing capability.
Laurie: What do you think makes Fundbox Fuse different from other credit lines?
Joanna: First, we aren’t asset or FICO dependant for our initial lines, meaning there’s no credit pull or paperwork to fill out to qualify for a Fundbox account. We simply take the banking information or data source and base our decision on that. Next, there’s no subjectivity based on human interaction. In a typical bank, a human underwriter makes the decision, making loans are expensive to assess and process. Small business owners face a barrier to entry before you talk to that human being. Fundbox’s risk algorithm can process 300 applications in the time that a traditional underwriter might be able to do to one or two.
Fundbox is actually complementary to other financing options. Many of our customers have a Fundbox account, trade lines of credit, credit cards and maybe a term loan. It is a different tool in the toolbox.
Laurie: What’s the draw for the partners?
Joanna: Our partners are in business to serve small businesses and entrepreneurs, to help with their business workflow. They provide small businesses with platforms that they use every single day to run their businesses. One of the best ways for them to help their customers is to provide them access to things that they wouldn’t normally have, within their workflow of the solution they provide. Offering easy access to a line of credit helps them improve on their fundamental business proposition. .
We also offer a revenue share to partners, but the main attraction is that the Fuse integration helps them to build out their platform. It allows their users to get what they need right from within the platform.
Laurie: What partners are you launching it with?
Joanna: We are launching with some great partners, including Paid, for small business invoicing; AND CO, which helps freelancers and small businesses run their businesses; Bookly, online bookkeeping software and bookkeeping service; Knowify, job management platform for construction contractors; and BillyApp, an online accounting software made just for entrepreneurs.
Laurie: What are you looking for from other potential partners?
Joanna: They have to have a cloud solution for small businesses, and a good reputation with the client’s that they serve.
Laurie: How long does it take them to get the code running on their sites?
Joanna: Minutes. It’s just three lines of code, kind of like installing a Facebook button. Anyone that wants to learn more about Fundbox and our offerings can check us out on www.fundbox.com.
Source: Laurie McCabe’s Blog