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    Best Small Business Loans Speaks to Fundbox

    Best Small Business Loans is a website that educates people on the details of small business loans to help them choose the best option for their needs. We asked Alexander Ward from the Fundbox team about their company, the business loans offers, and services.

    Who is the typical Fundbox client?

    For example, how long have they been in business, what industries are they in — are they consumer or business-facing businesses?

    Fundbox serves both B2B and B2C businesses. In particular, our solutions are purpose-built to meet the unique needs and pain points of B2B businesses, like waiting to get paid, covering payroll, and investing in growth. Our customers are typically B2B small businesses with 20 employees or fewer, with annual revenues of up to $1,000,000.

    How do business owners typically use a Fundbox line of credit?

    Fundbox provides fast and easy access to financial tools that enable our customers to cover business-critical operating expenses. Our working capital solution is particularly critical for B2B small businesses in bridging the typical 30-to-90-day receivables gap between the time they deliver a product or service and when they get paid for it. Their cash is often tied up in receivables, inventory, payroll, etc., and that’s where our customers typically use a line of credit from us.    

    How would you recommend small business owners choose between a term loan and a line of credit?

    Our Line of Credit allows customers to draw funds repeatedly, without reapplying, and repay each draw over 12 or 24 weeks. This product is best for customers looking to fund ongoing expenses (like payroll) or bridge cash flow gaps while waiting for outstanding receivables. Our Term Loan allows customers to draw a one-time lump sum, up to their approved limit and repay over 24 or 52 weeks and is particularly valuable to our customers who are looking to make an upgrade or invest in a large one-time expense, like new equipment.

    When should businesses consider an online lender versus applying with a bank or SBA lender?

    Traditional banks are best suited to serve larger, more established enterprises: the costs of underwriting a small business loan are the same as a large business. It’s also a heavily manual process that requires small business owners to take precious time out of their day (that they often don’t have) to visit bank branches in person and provide copious amounts of documents. Then they wait several weeks for a loan they may not be approved for when they need the capital immediately. And, approvals are still largely based on personal FICO scores as opposed to the health of the business.

    Digital-first financial platforms like Fundbox are purpose-built to meet the needs of small businesses; and while we serve both B2C and B2B businesses, Fundbox is purpose-built to meet the needs of B2B small businesses. Our process is fully automated, and 99% of the time there is no human intervention, meaning we can serve customers at scale, at a lower cost. Our AI also enables us to effectively underwrite smaller businesses. 

    The government has also launched various packages that are being offered through the federal Small Business Administration and through state and local governments, who are offering different programs to help small businesses navigate unprecedented situations. The CARES Act also allows a carryback of losses for five years. So, if a small-to-medium-sized business has experienced a loss in 2020, it can recover refunded taxes paid in the past.

    What types of data does Fundbox use when underwriting an application?

    How is it different from applying with a more traditional lender?

    We are re-inventing the entire process from the ground up. By connecting with customer bank accounts and accounting software, our AI enables us to deeply understand our customers, the entities they transact with, and the overall small business ecosystem. The data drives our credit decisions and enables us to build products that uniquely understand customer needs, and become more accurate over time with more data. 

    How did COVID-19 affect Fundbox’s business model?

    Did it have to make any temporary changes to rates, fees, and requirements? If so, when does it plan on phasing out these changes?

    Last year was challenging across many fronts, particularly for our small business customer base, but it was also a critical year for the company. The economic effects of COVID presented the true test of whether our underwriting models would survive an extremely challenging macroeconomic environment, and prove our $100M+ investment in AI. 

    We are in a fortunate position to have come out stronger on the other side. Fundbox successfully navigated the most significant economic crisis of modern times, keeping 30-day delinquency rates to high single digits (3-12x lower than our competitors), while continuing to transact loans and acquire new customers, while many of our competitors stopped transactions completely or exited the market altogether. 

    How do you think the lending market will change in 2021?

    There are two big opportunities that we are looking forward to in the immediate future:

    • The digitalization of SMBs, and particularly B2B SMBs, means there’s an opportunity for us to grow our product suite and become a broader financial platform for SMBs. We’re investing in and actively building some transactional and financial products to serve our customers. Ultimately we aim to provide a comprehensive suite of financial tools and services for small business owners.
    • Coming out of the pandemic-induced recession, the growth of the SMB sector has been incredible. There are lots of SMBs looking for capital while many traditional financial institutions have taken a step back from the space. There’s an incredible opportunity for us to serve more customers and scale our core credit business. 

    Besides the term loan that’s currently in beta, does Fundbox have any other projects in the works that you can discuss?

    We also recently just launched Insights, a free product that gives customers a clear view of their total cash balance across multiple business bank accounts, all in one place. Based on their historical transactions, our cutting-edge technology lets us predict their future balance so that they can make better, faster decisions. They can customize their insights by setting the minimum balance they need to keep their cash flow healthy and by simulating future scenarios that their business might face. 

    We’re also working on other products within the payments space and hope to have more news to share on that front later this year.