Fundbox offers a way for businesses to get paid in advance for their outstanding invoices. An advance on invoices such as the one offered by Fundbox are an option for businesses who offer their customers net-30, 60, or 90 day payments who need to close the payment gap and cover cash flow needs.
As of late July 2016, Fundbox had processed 39 million invoices from 30,000 small businesses nationwide, a growth of about 17 million invoices since December of last year. They also recently announced the launch of a mobile app, intended to allow business owners to quickly deal with cash flow issues in one click on their phone.
How does invoice financing through Fundbox work?
Invoice financing allows business owners to get an advance on outstanding invoices before they are due from customers. The lender uses your outstanding invoices as collateral on the amount they advance to you. This is different from invoice factoring, where a business owner will sell their outstanding invoices to the third party lender, and the lender will take over the relationship with your customers.
Using Fundbox’s invoice advance service, you still manage all interaction with your customers and invoices to make sure you get paid and are able to make on-time payments to the invoice financing company. In other words, Fundbox will only interact with your online bookkeeping system.
This is a good thing for some business owners because it alleviates a fear that an invoice financing company will damage a reputation they’ve built with their customers. Others view this as a downside because it also means that you are still responsible for making sure you get paid by your customers so you can pay back your lender.
The bookkeeping apps that Fundbox currently works with are Quickbooks, Xero, Freshbooks, Clio, Harvest, Wave, Sage One, InvoiceASAP, Kashoo, and Jobber.
Fundbox requires that business owners have at least a few months of accounting and invoicing transactions under their belt using one of the above bookkeeping systems. They will advance 100% of the invoice amount for small invoices ($100,000 or less), and you are expected to pay it back over 12 weeks or 24 weeks of equal payments. If you repay your advance early, you will not be responsible for the fees during the weeks after you repay the loan, allowing you to save money.
Who is Fundbox best for?
Fundbox is a good option for B2B businesses looking to fund invoices less than $100,000, who have a solid history of receiving invoices through one of their bookkeeping app partners. Fundbox is especially worthwhile for businesses that:
- Can make their full repayment in less than the specified term (12 or 24 weeks)—doing so will reduce the fee amount on your payment advance.
- Expects a continuing need for Fundbox’s services—the more you work with Fundbox and make full payments on time, the more likely they will be to lower your fees.
What does it cost me?
Fundbox charges 5% to 7% of the total invoice value, amounting to 13.44% to 67.70% annual percentage rate (APR). Here’s an example Fundbox gives on their website:
If you had a $1,000 invoice that you wanted advanced, you would pay back one-twelfth of that amount each week for 12 weeks, plus about a $6 weekly fee. So you’d be paying back ($83 + $6) = $89 each month and the total cost would be $72 for a $1,000 invoice. Using a loan calculator, we can see that this is about a 53% APR for the invoice.
Fundbox’s repayment schedule is set up so that you pay an equal amount over 12 or 24 weeks, however there is no prepayment penalty. So let’s say the invoice you had funded is repaid in 30 days. You could pay Fundbox back the total advanced amount by the 5th week and only end up paying 5/12 of the fees you were quoted when you accepted the advance. In the $1,000 invoice example from above, paying Fundbox after five weekly payments would reduce the fees to just $30.
How do I set up an account?
You do not need to give any personal information to set up an account with Fundbox, just your contact information.
In order to add the invoices you’d like advanced, you will need to connect your bookkeeping app. Fundbox requires you to have used your bookkeeping system for at least three months.
You can sign into your bookkeeping app straight from the Fundbox portal, and authorize Fundbox to access your account data.
And that’s it! It takes Fundbox 24 hours or less to sync your account data, at which point you will be able to choose what invoices you’d like to be paid in advance.
Invoice financing providers such as Fundbox offer a fast and convenient way to cover cash flow gaps. Invoice financing and factoring comes at a higher cost than other business financing options such as term loans, but the cost might be worth it for you if:
- You have a number of small invoices (less than $100,000) and have done your due diligence or have been working with your customers long enough to know they will make on-time payments.
- You have an immediate need because of inconsistent cash flow.
- You are committed to being diligent about maintaining relationships with your customers and paying Fundbox back early (to receive a discount) when you are able to do so.
Here’s how Fundbox compares to other invoice financing providers:
|Type||Invoice financing. The lender uses your invoice as collateral.||Purchase order financing. Intended to finance customer orders.||Invoice factoring. You sell your invoices to the lender.|
|Minimum Requirements||Must have a business checking account and an accounting software with 3+ months of data.||Any U.S. resident with registered U.S. business + U.S. bank account + Social Security number.||B2B or B2G (business to business or business to government) businesses only. Must be at least 3 months in business and over $10,000 in monthly revenue.|
|Credit Minimum||None||Not Specified||530+|
|Amount||$100,000, 100% of an invoice||Up to $50,000, and up to 98% of your receivables||Up to $500,000, or 85% of the invoice|
|Cost||13.44% to 67.70% APR. 5% to 7% of the total invoice amount.||1% to 3% monthly fee. 20% to 69% APR||0.3% to 1% per week. Up to 60% APR|
|Repayment timeline||12 or 24 weeks||30 to 150 days||1 to 12 weeks|
|Prepayment penalty?||No. You only pay for the weeks you use the advance||No||No|
|Time to fund||As fast as 1 day||Instant||Same day|
Again, Fundbox is an option for B2B businesses with small invoices (less than $100,000), who have a solid history of maintaining customer relationships through one of Fundbox’s bookkeeping app partners. Fundbox is especially worthwhile for businesses who can make their full repayment in less than 12 weeks—doing so will reduce the fee amount on your payment advance. Businesses with larger invoices can turn to companies such as Bluevine, who will fund 85% of your invoice with a line of credit up to $500,000.
Make sure you’re aware of other business financing options out there! Business credit cards and business lines of credit are two other options that can help smooth out cash flow and may be less expensive for you than invoice financing. Check out a number of other options here.
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