Setting up a business is one hell of a task in itself, but running it smoothly that too with limited finance takes the difficulty level to the par. The tricky part of this reality is finding customers who can afford the services and generating enough sales to keep the company going. Many of the times the clients do not have enough money to buy services and products which puts them in a weird position. But if businesses’ only deal with the customers who have enough credit to avail their offerings, there’s a great chance the number of sales will take a huge hit, leaving their hands tied. To solve this problem, many small businesses, primarily in SMB2B transactions offer net terms to their customers according to which they get the services today but they also get the grace period to pay up their dues. Prashant Fuloria, the CEO of Fundbox, a leading fintech company that uses big data analytics, predictive modeling, and engineering to help small businesses optimize their cash flow with impressive closing, says, “In the past, the benefits of improvements in technology have disproportionately gone to larger companies (enterprises, mid-market) these larger companies have been able to benefit from technology through things like CRM systems, accounting systems, HR systems, etc. which begs the question – will advances in technology make the playing field more difficult for small businesses (as compared to their larger competitors)?”
Generally speaking, offering net terms really helps many small businesses boost up their sales, and gain new clients, a competitive edge, and unshakable customer loyalty. However, like everything, this solution also has its limitations. Often the clients are unable to clear their dues in time, which ends up restricting the cash flow once again and poses a huge risk for the vendor company in terms of acquiring a bad debt. Some companies do offer an early payment discount to motivate the clients to pay before the due date but that further trims down their margin. This often leads the small business owners to seek funding from other platforms in order to keep going. One such platform is Fundbox that was founded in 2012 by Eyal Shinar, Tomer Michaeli, and Yuval Ariav. Based in San Francisco, Fundbox was designed to help small businesses manage their cash flow and enhance their ability to grow. By providing fast, simple and transparent access to business credit or getting B2B merchants to offer favorable net terms to their clients without having to assume overhead costs and risks associated with running an in-house net-terms program. Prashant says, “We believe that technology can be harnessed to level the playing field and give small businesses the chance to operate, serve their customers, and compete. At Fundbox, we work to use technology to eliminate some of the financial challenges (e.g. cash flow/working capital) that small businesses face (that larger players do not). However, the larger purpose behind Fundbox is to enable large-scale business transformation by optimizing the way that funds (payments and credit) flow into a business or between transacting businesses. By combining ML-enabled risk mitigation with on-demand access to business credit and bringing both to the point if need, Fundbox has built a better way to conduct commerce that keeps pace with 21st-century business needs.”
We believe that technology can be harnessed to level the playing field and give small businesses the chance to operate, serve their customers, and compete.
For the Ready
Following the mission to help customers that are growth-oriented build-up their company by accelerating payments and credit, Fundbox’s mission is to revolutionize the B2B economy by changing the way funding flows. Being a leader in the industry seeking metamorphosis of B2B commerce, Fundbox heavily invests in machine learning and finding ways to perform faster analytics of transactional data. Prashant highlight’s, “Fundbox is reimagining B2B payment and credit products in new category-defining ways.” Primarily, Fundbox offers two services- one is providing credit for businesses looking to grow and the second in regards to net terms. A recent Frost & Sullivan research paper found that B2B merchants that use Fundbox net terms may see increases in revenue up to 35% which makes the significant investment made by Fundbox in data, data science, and machine learning to assess risk worth it. In fact, Fundbox is the first company that used newly available data streams including the information from the ledger software and business bank accounts to develop a dynamic credit composite of the applicant. Now, using Fundbox’s platform anyone can easily determine the caliber of business in as fast as 45 seconds to up to 2 minutes. Although, it is still a novel approach for many financial institutions that still use the personal credit score of the business owner as a key indicator of potential financial risk. Fundbox’s way is not just more efficient but it’s simple too. Here, it only takes a few minutes to apply for the credit, unlike traditional document-intensive underwriting processes that take up to days or weeks to complete. Maintaining themselves as a customer-centric company, it majorly serves small to medium businesses and uses a Small Business Data Graph to make quick and effective credit decisions by just looking at their graph of financial transactions within their business network. Prashant exclaims, “Our ability to look at a business in real-time, within the context of its network—not a lot of static pieces of information—is a different approach to assessing a business’s health than other traditional methods, and it is possible because of the Small Business Graph. Like the Facebook graph that provides valuable relationship insights among people and the LinkedIn graph that provides insights about relationships between professionals, the Small Business Graph maps the interactions among small businesses. It offers important business insights that enable Fundbox to serve small businesses that no one else can and deliver fast credit decisions that don’t rely on personal credit.”
Our ability to look at a business in real-time, within the context of its network—not a lot of static pieces of information—is a different approach to assessing a business's health than other traditional methods, and it is possible because of the Small Business Graph.
Growing through the pandemic
Coronavirus has dynamically changed the way commercial transactions occur. For instance, most payments are being carried out digitally through apps and services like Fundbox to expedite stuck payments and keep the cash-flow running. However, as the pandemic struck the world, and businesses had to pull down their shutters, Fundbox took the opportunity to develop tools that allowed them to articulate risk amongst their clients while still maintaining their focus on customer-fulfillment. As a result, their business is in a much stronger position and is even more excited to bring in innovations while refining their credit models. Speaking of the way COVID-19 pandemic has impacted the industry and their organization, Prashant shares, “Fundbox has been fortunate that our investments in data science and machine learning have enabled us to manage and minimize risk against our portfolio while still serving and originating for our customers. While many Fintechs locked their credit down and stopped serving their customers, we were able to manage loss rates due to defaults with surgical precision.” To contribute to the fight against the coronavirus, Fundbox has also initiated an approved SBA Payroll Protection Program lender to expedite access to relief funds for their customers and other small businesses who apply through them. Also, the average amount for their PPP loans is $30K which is much smaller than many other lenders which further helps smaller SMBs who were turned away by their banks. To date, Fundbox has facilitated more than $300 million in PPP loans and a testament to efforts are the many positive Trustpilot reviews they have received from the small business owners we have served.
Going forward, Prashant says, “Our aspiration is to continue to develop meaningful financial products and services that are designed to transform B2B commerce at scale. Whether it’s accessing a business line of credit or enabling faster payments to merchants, we want to build solutions that help businesses to be financially agile so they grow faster or they can remain more resilient should times be challenging.”