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Fundbox: Big Data Powering Small Business
When Fundbox began rolling out its services back in 2013, it was a head-turner and an eyebrow-raiser for businesses and even consumer-centric media outlets. Their idea of a cutting-edge solution tailored exclusively to address the historically overlooked financial challenges faced by small businesses—which, for the record, make up for 99.7 percent of the employer firms in the U.S.—is indeed an ambitious initiative. Fast forward five years, and this California-based enterprise, today, has become the rescuer for many SMBs from a finance standpoint.Looming Predicaments of SMBs
One of the factors that spurred the conception of Fundbox traces back to an instance when the company’s co-founder’s mother couldn’t avail a loan for her small business. In the U.S. alone, there are close to 29 million small businesses that account for more than half of the private sector jobs in the country. After all, many of the largest and most well-known companies of today were once small businesses. Despite their large presence and role in the economy as a whole, and in the services and solutions space specifically, small businesses are vulnerable at large, to financial constraints that may adversely affect their very foundations. Instances such as rejected bank loan applications and heaping of unpaid invoices can pressurize business owners. At any given point in time, roughly 54 percent of SMBs are burdened by late payments that amount to almost a trillion dollars.
On the other hand, the plethora of financing options available today is not really cut-out for small businesses. For large enterprises, banks can work in a more bespoke fashion—by putting together assessments involving underwriters, risk analysts, and auditors to give larger financial grants. For SMBs—who may only need a 25k grant as opposed to a million—such facilitations are perhaps beyond reach. Without options, many business owners mix their personal accounts with their business accounts which can be unfavorable at many levels. Others might just hamper customer relations in the name of “invoice factoring.” Moreover, higher interest rates, multitudes of opaque fees and penalties are prevalent in the small business lending space which could plunge small businesses into neck-deep debt. These scenarios make it difficult for small businesses to get the working capital that they need to survive and thrive in a competitive market. This is where Fundbox turns the tables by introducing a novel lending process that makes the best use of three emerging trends: cloud adoption, data exchange for value, and predictive analytics.
The company’s founders, Eyal Shinar, Tomer Michaeli, and Yuval Ariav smartly connected these dots to bring about a perfect lending model. “Fundbox is giving small businesses, a new financial power by democratizing access to working capital. Business owners share a snapshot of their digital financial records. In exchange, Fundbox gives them a credit decision within minutes. And if approved they can have funds delivered to their business bank accounts as soon as the next business day. We take the concept of ‘data exchange for value’ quite literally here at Fundbox,” says Prashant Fuloria, COO of the company.
We want to help make it easier for businesses to pay and get paid
“There is no other service offering that lets businesses easily connect their bank account and basic information to prompt access to a business line of credit. We want to help make it easier for businesses to pay and to get paid,” adds Fuloria.
Clearing Hurdles
Truth be told, starting up, growing and maintaining a small business is anything but easy. Owners often take on personal liabilities in order to fund and sustain their business ideas. By the time they reach a point of growth and a need for financing, their personal finances may not be in a great shape. Therefore it is no surprise, that traditional lenders, who rely heavily on credit reports and underwriting, understandably have a hard time processing these applications.
When small businesses connect their business bank account or accounting software to Fundbox at the click of a button, Fundbox’s proprietary AI-powered underwriting model assesses their business health to offer a credit decision within minutes. Approved businesses can access their revolving line of credit and draw accordingly. The entire process takes minutes and is 100 percent online. Endorsing easy and quick eligibility, along with immense transparency, Fundbox does away with the need for mandatory collateral and personal guarantee. The company’s consolidated fee structures comprise a single and straight forward weekly fee with an option between a 12-week or a 24-week repayment plan. Fundbox has no penalty for early repayment, giving businesses an opportunity to really control how much they pay for the credit that they use.
“We are able to offer such a fast credit decision because we use our own model to make credit decisions. We like to think of the Fundbox Small Business Graph as our ‘secret sauce’. It essentially maps companies and their b2b transaction channels pretty much the same way how Facebook identifies users and their connections as nodes and edges. As such, the more businesses connect with Fundbox, the more robust our underwriting model becomes,” notes Fuloria. Today, the company has native integration with pretty much every invoicing or accounting software along with over 12,000 financial intuitions.
Gaining mastery over seamless API connectivity across cloud-based accounting platforms to compile financial data from various sources while maintaining utmost user ease and friendliness was a feat Fundbox achieved within a couple of years since its inception. “You have to remember, we are building an alternative underwriting model for small business financing. Making it extremely easy for owners to share their business data with us was key to enable machine learning and build our model”, says Fuloria. In the following years, Fundbox strategically fine-tuned their AI stack while gaining “critical volumes of data.” “Fundbox was running a fairly open credit allocation infrastructure. We did face incurring losses en route to reaching the point of acquiring critical data to train our model. Investing in data and model training is necessary when you are building the ultimate model that predicts risk factors and customer behavior accurately.
Today, our loss rate has plummeted to single-digit levels and continues to decline. The machine is working! 2016 was the year we went on to achieve full expertise in leveraging near-perfect machine learning capabilities for our predictive operations,” prides Fuloria.
With a fully AI-based underwriting model that delivers single digit loss rate, “2017 was our year to stress test our platform with iterations of tailor made business credit solutions for onboarding business information and underwriting business loans in as close to real time as possible. And we did. We released new products, namely, Direct Draw – Fundbox Business Line of Credit which is integrated with over 12,000 banks and financial institutions; and Fundbox FUSE – a novel product that enables SMB SaaS providers to power their products with Fundbox by adding a financing dashboard within their own applications. This, in turn, promises to minimize customer churn in addition to further simplifying and expanding small business’ access to FundboxCredit™; and Fundbox Pay – the company’s business payments network.”
"At the end of the day our mission is to give small businesses access to the capital they need, when they need it, on terms that are most fitting to each business’s situation. Now we are at the point that we can truly deliver on this promise"
The launch of the Direct Draw product in 2017 let Fundbox serve more businesses than ever before and further sharpen the edges of its lending model. Prior to Direct Draw, Fundbox relied heavily on accounting records and invoices. What makes Direct Draw special is the way Fundbox is able to make credit decisions by reviewing business bank transactions alone. “By simply connecting the business bank account, we can automatically assess the health of the business,” adds Fuloria.
Impressive Track Record for a Promising Roadmap
With all its innovations, Fundbox is recognized and appreciated in the SMB landscape. The company has earned an impressive score of 9.7/10 rating on Trustpilot based on over 800 reviews, a clear reflection of the value proposition that Fundbox imparts to its clients. Fundbox continues to make silver bullets to address the looming financial predicaments that haunt small businesses. Fundbox Pay is one such innovative rollout which enables “credit card” like funding models for small businesses wherein borrowers can enjoy Net-60 on their dues while their creditors get paid right away.
“Hitting the first two milestones of a reliable AI-based business credit model and a scalable platform infrastructure lets us raise the bar yet again this year. We plan to make Fundbox accessible to more and more SMBs by continuing to iterate on our own platform to release new custom business credit solutions. At the end of the day our mission is to give small businesses access to the capital they need, when they need it, on terms that are most fitting to each business’s situation. Now we are at the point that we can truly deliver on this promise. There is a lot that we can do, and that is guided by our mission and vision,” adds Fuloria. The company’s sky-high potential has drawn in several investors. Some of the most prominent VC firms such as Spark Capital Growth, Bezos Expeditions (the personal investment arm of Jeff Bezos), Khosla Ventures, and SV Angel to name a few, back Fundbox. As such, Fundbox continues to aim and subsequently reach greater heights as it flawlessly adheres to the complete literal sense of its brand name.
With a fully AI-based underwriting model that delivers single digit loss rate, “2017 was our year to stress test our platform with iterations of tailor made business credit solutions for onboarding business information and underwriting business loans in as close to real time as possible. And we did. We released new products, namely, Direct Draw – Fundbox Business Line of Credit which is integrated with over 12,000 banks and financial institutions; and Fundbox FUSE – a novel product that enables SMB SaaS providers to power their products with Fundbox by adding a financing dashboard within their own applications. This, in turn, promises to minimize customer churn in addition to further simplifying and expanding small business’ access to FundboxCredit™; and Fundbox Pay – the company’s business payments network.”
"At the end of the day our mission is to give small businesses access to the capital they need, when they need it, on terms that are most fitting to each business’s situation. Now we are at the point that we can truly deliver on this promise"
The launch of the Direct Draw product in 2017 let Fundbox serve more businesses than ever before and further sharpen the edges of its lending model. Prior to Direct Draw, Fundbox relied heavily on accounting records and invoices. What makes Direct Draw special is the way Fundbox is able to make credit decisions by reviewing business bank transactions alone. “By simply connecting the business bank account, we can automatically assess the health of the business,” adds Fuloria.
Impressive Track Record for a Promising Roadmap
With all its innovations, Fundbox is recognized and appreciated in the SMB landscape. The company has earned an impressive score of 9.7/10 rating on Trustpilot based on over 800 reviews, a clear reflection of the value proposition that Fundbox imparts to its clients. Fundbox continues to make silver bullets to address the looming financial predicaments that haunt small businesses. Fundbox Pay is one such innovative rollout which enables “credit card” like funding models for small businesses wherein borrowers can enjoy Net-60 on their dues while their creditors get paid right away.
“Hitting the first two milestones of a reliable AI-based business credit model and a scalable platform infrastructure lets us raise the bar yet again this year. We plan to make Fundbox accessible to more and more SMBs by continuing to iterate on our own platform to release new custom business credit solutions. At the end of the day our mission is to give small businesses access to the capital they need, when they need it, on terms that are most fitting to each business’s situation. Now we are at the point that we can truly deliver on this promise. There is a lot that we can do, and that is guided by our mission and vision,” adds Fuloria. The company’s sky-high potential has drawn in several investors. Some of the most prominent VC firms such as Spark Capital Growth, Bezos Expeditions (the personal investment arm of Jeff Bezos), Khosla Ventures, and SV Angel to name a few, back Fundbox. As such, Fundbox continues to aim and subsequently reach greater heights as it flawlessly adheres to the complete literal sense of its brand name.
