Published By Janet Gershen-Siegel at September 19, 2018
Written by Janet Gershen-Siegel
Fundbox is one of several lending companies online. They offer Invoice Financing (which is not the same as Invoice Factoring). Our Fundbox review can help you make the best decision for your business.
Fundbox has raised more than $100 million in capital from Silicon Valley investors such as General Catalyst Partners, Khosla Ventures, Blumberg Capital, Entrée Capital, and Spark Capital. They count Jeff Bezos of Amazon as one of their investors.
We look at the specifics and drill down into the details.
Fundbox is located online here: https://fundbox.com/. Their physical address is:
300 Montgomery St.
San Francisco, CA 94104.
Rather than purchasing your accounts receivables for a percentage of the money owed to you, they will instead finance the full amount in the form of what is essentially a loan and then you will pay it back as your customers pay their invoices. Fundbox does not communicate directly with your customers; you will continue to do so.
Fundbox’s fees start at 4.66% of the amount drawn. If you pay early, then the remaining draw amount plus one weekly fee is debited from your account on the upcoming payment date. However, if you miss a payment, then your late fee is three times your weekly payment plus an ACH missed payment reimbursement fee.
They also offer Business Lines of Credit. You can get line of credit up to $30,000 within one hour and up to $100,000 with financials. There is no personal credit score requirement; they just want to connect to your business bank account. They can provide up to $100,000 in credit.
Fundbox supports several types of accounting software, including:
They also support:
Advantages include their exceptional flexibility in connecting to your business bank account, and fast approval. Another advantage is that Fundbox stays out of your relationship with your clients. Your clients need never know that you are working with Fundbox.
Disadvantages include a high fee if you miss a payment.
The businesses which do best with Fundbox will be those which can pay back their debts on time. But this is the case with virtually all online lenders, of course.
In addition, entrepreneurs with poor credit will be able to turn to Fundbox. This is vital as most other online lenders will not do the same.
Companies without a long time in business might also do well. While neither a minimal time in business nor a minimal annual or monthly revenue requirement is spelled out on the site, there has got to be some sort of minimum in both areas.
As might be expected, companies which miss payments will not do so well with Fundbox – but that is the case with all online lenders.
Of course we recommend business credit building as an alternative to Fundbox.
Since small business credit is separate from personal, it helps to safeguard a business owner’s personal assets, in the event of legal action or business bankruptcy. Also, with two separate credit scores, a small business owner can get two separate cards from the same vendor. This effectively doubles buying power.
Another benefit is that even start-ups can do this. Heading to a bank for a business loan can be a recipe for disappointment. But building corporate credit, when done right, is a plan for success.
Individual credit scores depend upon payments but also other elements like credit usage percentages. But for business credit, the scores truly just hinge on if a corporation pays its invoices on a timely basis.
Growing corporate credit is a process, and it does not happen without effort. A business needs to actively work to build company credit. Nonetheless, it can be done readily and quickly, and it is much faster than establishing personal credit scores. Vendors are a big part of this process.
Carrying out the steps out of order will lead to repetitive rejections. Nobody can start at the top with business credit. For example, you can’t start with store or cash credit from your bank. If you do you’ll get a rejection 100% of the time.
A corporation has to be trustworthy to lending institutions and vendors. For this reason, a small business will need a professional-looking web site and e-mail address, with website hosting from a company like GoDaddy. Plus business phone and fax numbers ought to have a listing on 411.com.
Additionally the business telephone number should be toll-free (800 exchange or the equivalent).
A company will also need a bank account devoted strictly to it, and it has to have all of the licenses essential for operation. These licenses all have to be in the accurate, appropriate name of the small business, with the same business address and phone numbers. Note that this means not just state licenses, but potentially also city licenses.
Visit the Internal Revenue Service website and get an EIN for the corporation. They’re free of charge. Select a business entity such as corporation, LLC, etc. A business can begin as a sole proprietor but will most likely wish to switch to a form of corporation or partnership to limit risk and make best use of tax benefits.
A business entity will matter when it involves tax obligations and liability in case of a lawsuit. A sole proprietorship means the entrepreneur is it when it comes to liability and tax obligations. Nobody else is responsible.
If you operate a business as a sole proprietor at least file for a DBA (‘doing business as’) status. If you do not, then your personal name is the same as the business name. As a result, you can wind up being directly responsible for all business debts.
In addition, per the Internal Revenue Service, by having this arrangement there is a 1 in 7 possibility of an IRS audit. There is a 1 in 50 chance for corporations! Avoid confusion and dramatically reduce the odds of an IRS audit as well.
Start at the D&B web site and obtain a free DUNS number. A DUNS number is how D&B gets a corporation into their system, to produce a PAYDEX score. If there is no DUNS number, then there is no record and no PAYDEX score.
Once in D&B’s system, search Equifax and Experian’s web sites for the company. You can do this at https://www.creditsuite.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process. In this manner, Experian and Equifax will have activity to report on.
First you must establish trade lines that report. This is the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.
And with an established business credit profile and score you can start obtaining retail and cash credit.
These varieties of accounts often tend to be for the things bought all the time, like coffee, shipping boxes, outdoor work wear, ink and toner, and office furniture.
But first off, what is trade credit? These trade lines are credit issuers who will give you preliminary credit when you have none now. Terms are generally Net 30, instead of revolving.
Hence if you get approval for $1,000 in vendor credit and use all of it, you will need to pay that money back in a set term, like within 30 days on a Net 30 account.
Net 30 accounts need to be paid in full within 30 days. 60 accounts must be paid in full within 60 days. Unlike with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you made use of.
To kick off your business credit profile the right way, you should get approval for vendor accounts that report to the business credit reporting agencies. As soon as that’s done, you can then make use of the credit.
Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.
Not every vendor can help in the same way true starter credit can. These are merchants that will grant an approval with minimal effort. You also want them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.
But you may need to apply more than once to these vendors, and you may need to buy some items you don’t need, to confirm you are reliable and will pay in a timely manner. Consider donating nonessential items to charitable organizations.
Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, move onto the retail credit tier. These are companies such as Office Depot and Staples. These companies are likelier to have items you need.
Use the corporation’s EIN on these credit applications.
Are there 8 to 10 accounts reporting? Then progress to the fleet credit tier. These are companies such as BP and Conoco. Use this credit to buy, fix, and take care of vehicles. Make sure to apply using the small business’s EIN.
Have you been responsibly handling the credit you’ve up to this point? Then move to the cash credit tier. These are companies like Visa and MasterCard. Keep your SSN off these applications; use your EIN instead.
These are companies such as Walmart and Dell, and also Home Depot, BP, and Racetrac. These are frequently MasterCard credit cards. If you have 14 trade accounts reporting, then these are feasible.
Know what is happening with your credit. Make certain it is being reported and deal with any errors ASAP. Get in the habit of checking credit reports and digging into the specifics, and not just the scores.
We can help you monitor business credit at Experian and D&B for 90% less than it would cost you at the CRAs. See: https://www.creditsuite.com/business-credit-monitoring.
Update the info if there are inaccuracies or the info is incomplete.
So, what’s all this monitoring for? It’s to contest any errors in your records. Mistakes in your credit report(s) can be taken care of. But the CRAs usually want you to dispute in a particular way.
Disputing credit report inaccuracies normally means you send a paper letter with duplicates of any evidence of payment with it. These are documents like receipts and cancelled checks. Never mail the original copies. Always send copies and retain the original copies.
Disputing credit report errors also means you precisely detail any charges you contest. Make your dispute letter as understandable as possible. Be specific about the problems with your report. Use certified mail so that you will have proof that you sent in your dispute.
Always use credit sensibly! Never borrow more than what you can pay back. Keep an eye on balances and deadlines for payments. Paying promptly and fully will do more to boost business credit scores than nearly anything else.
Building corporate credit pays. Good business credit scores help a small business get loans. Your loan provider knows the small business can pay its debts. They understand the business is bona fide. The company’s EIN connects to high scores, and credit issuers won’t feel the need to ask for a personal guarantee.
Business credit is an asset which can help your small business for years to come.
And finally, as with every other lending program, whether online or offline, always remember to read the fine print and do the math. Go over the details with care. And decide if this option will be good for you and your company.
In addition, consider alternative financing options that go beyond lending, including building business credit, in order to best decide how to get the money you need to help your business grow. Today, we want to hear from our audience! Share your voice with us about your experiences with online lenders. And let us know your opinion of our Fundbox review.