SMB alt lender Fundbox secures $176 million to move further into B2B paymentsOctober 27, 2019
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US-based fintech Fundbox has secured a $176 million Series C funding round from investors including Allianz X and General Catalyst, in addition to a $150 million credit facility, according to Business Insider. Fundbox focuses on small- and medium-sized business (SMB) lending as well as business-to-business (B2B) payments.
The fintech integrates with third-party data sources like accounting software or invoice systems to underwrite loans for SMBs, allowing it to get a better view of its borrowers’ finances. It makes a credit decision in under a minute, which helps streamline the loan application process for SMBs.
The fintech hopes that this will be its last funding round, which would be a good indication of a sustainable business model. It will use the fresh funding to hire more staff, develop new products, and potentially expand outside the US.
- SMBs remain underserved by conventional financial institutions (FIs), causing cash flow issues for such companies. US firms are owed around $3.1 trillion in accounts receivables from “buy now, pay later” B2B payments. This payment gap contributes to cash flow issues for smaller companies: 20% of small businesses run into cash flow problems due to late payments, for example. Fundbox tackles this by offering SMBs a short-term loan between 18 to 24 weeks with fixed fees starting at 4.66%, and due to its use of alternative data, it’s more likely they’ll get approved for a loan than with conventional FIs: 82% of business loan applicants are denied in the US. Additionally, Fundbox offers a service to B2B sellers, Fundbox Pay, allowing them to get paid at the time of sale, while buyers can repay over a 60-day period; for context, it can typically take over 58 days for these sellers to be paid in full.
- Fundbox also wants to move further into B2B payments. The B2B payments market has seen less innovation than the business-to-consumer (B2C) payments market, which is making it harder for businesses to conduct payments: Over 50% of B2B payments are still being made using paper checks, for example. By moving further into the space, Fundbox is likely aiming to enhance and overhaul the infrastructure for B2B payments, which will likely see high demand from businesses. Mastercard is on a similar route and recently announced that it’s looking to simplify and digitize B2B payments by offering a central payments platform to connect buyers to sellers. Given that the B2B payments industry is wortharound $127 trillion, there’s likely space for multiple players to thrive.
As fintechs continue to rebundle finance, the lines between different segments in the industry will become increasingly blurred. Payments company Square already moved into the consumer lending space in October last year and is currently testing a feature that would allow customers to trade stocks for free.
Meanwhile, payments company Stripe launched its Corporate Card and an SMB lending product earlier this month. As larger and established fintechs further diversify their offerings by moving into new segments of the financial services industry, we’ll likely see competition heightening, potentially causing smaller players to fold. And as these lines continue to blur, it’ll become increasingly important for larger players to personalize their services using data to differentiate from the competition and gain greater market share.
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