Fundbox, a financial technology company, has transitioned from product-centric to platform-centric with its new B2B trade credit and payment service.
The new service is set up so the company can make a credit decision in under three minutes, using real-time risk assessment with on-demand access to capital at the moment of transaction. The catch is that both buyers and sellers have to be on the Fundbox platform. Still, the speed of the new AI-enabled underwriting with on-demand capital is believed to be a game changer in unlocking cash flow that might otherwise be tied up with invoices in the accounts receivable ledger of a company’s balance sheet.
Prashant Fuloria, chief operating officer for Fundbox, said, “With checkout capabilities for Fundbox Pay, customers now have more ways than ever to tap into their Fundbox credit, and partners now have new ways to contextualize access to credit in their workflows.”
The new capability is available in the U.S. Relying on a 2017 Forrester Research report, Fundbox said estimates have the U.S. business-to-business e-commerce transactions possibly reaching $1.2 trillion by 2021.
Founded in 2013, the company has offices in San Francisco and in Tel Aviv. To date, the company has completed more than $1 billion of originations, involving 135,000 connected customers. Investors include Khosla Ventures, General Catalyst, Sparks Growth Capital and the investment arm of Amazon’s Jeff Bezos. So far, the fin-tech firm has raised $140 million.
According to Greg Powell, head of marketing at Fundbox, for apparel firms, about 29 percent of monthly revenue is locked in accounts receivable. And when a “seller or brand offers trade credit to a retailer, they are [often] taking on the risk assessment themselves,” Powell said, adding that review process is labor intensive. And with net terms 30, 60 or 90 days to pay, retailers often can’t buy more until after they pay what they owe, Powell said.
The technology–mostly algorithms analyzing transactions that a company does business with–sometimes allows underwriting in even less than a minute, Powell said, far quicker than the day or two that it might take a factor to do a credit check. Financial firms that have a factoring division buy a company’s accounts receivable for a fee and provide financing to a vendor. The lender in turn undertakes the collection risk connected to the receivables.
Once Fundbox determines that a retailer passes muster, the funds are available right away for payment to the vendor. And while Fundbox undertakes the risk that a retailer won’t pay, that doesn’t appear to be a concern. The fin-tech firm says after six years of analyzing data, it has gotten really good at predicting fraud, and that its loss rate is in the low, single-digits.