Small business finance is one of the most competitive, innovative and challenging markets in which to operate. 2016 was a big year for the industry, with some of the largest names in alternative finance faltering, the industry as a whole taking a wait-and-see approach to regulation and its ongoing expansion as new market entrants continued to filter in.
For invoice financing company Fundbox, the best way to navigate in a field like this is to stay focused on the task at hand.
“We have tremendous demand for our product, we’re growing and we’ve had a lot of success delivering value back to SMB customers,” said Fundbox’s Jordan MacAvoy, VP of marketing. “We’re staying focused on that core mission.”
That dedication and focus is what led Fundbox to secure gold in the PYMNTS.com Innovation Project 2016 Awards category of Best Small Business Innovation. MacAvoy told PYMNTS that, since winning that award, that focus hasn’t faltered, either. Paramount to Fundbox’s strategy, he explained, is its underwriting process.
“Our foundation is built on leveraging data science and machine learning to provide a better mechanism for evaluating risk with SMBs,” he said. “It’s really meant to be based on the merit of the business. While it’s not the flashy part of our business, it’s really an area we spend a lot of time further refining and making sure we’re constantly looking for ways to do better.”
That process has been a part of Fundbox since the beginning, he said. But the last 12 months also saw new developments for the company. MacAvoy pointed to the launch of the Fundbox mobile app, a way to accommodate the business owners that either work on-site and in the field or those that are simply “accustomed to managing at least parts of their business through their mobile device,” he said. The firm also increased its line of credit that it offers SMB clients up to $100,000 and introduced more flexible repayment terms, expanding the repayment timeframe option from 12 weeks to 24 weeks.
Finally, Fundbox highlighted its integration into QuickBooks Online, allowing QuickBooks users to seamlessly link into Fundbox’s invoice financing and lending services direct from the QuickBooks platform.
Market Progress
All of these developments are a part of Fundbox’s broader emphasis on progress and innovation, MacAvoy said, at a time when the alternative SME lending ecosystem is enduring some big changes — and potentially bigger ones to come.
Trends like greater demand for mobility and new technologies to mitigate credit risk are always welcome from the company, the executive said. One of the key challenges for the company, and for any SME lender, is to develop the ability to assess the small business as a borrower — and not the individual behind that business, he noted.
The issue of delayed SMB payments is another challenge that has not only given rise to demand in invoice financing solutions but has also forced FinTechs and their small business clients to explore better ways to manage cash flow. Taking on that challenge, and getting recognized for the effort, means Fundbox is doing its job, MacAvoy said.
“Being labeled an innovator is something that we love,” he stated. “We think of ourselves as providing innovative solutions. We pride ourselves on our ability to take new or emerging technology and look at old problems and look for new ways of doing things and being able to deliver value back to our customers.”
Innovators need to examine how to change the way small businesses can access financing, he said, especially in an era in which these small businesses are having to wait as much as 120 days to get paid from their larger business clients. This “delayed income,” the executive said, is now “common business practice,” a new reality that forces FinTechs to explore new ways SMEs can manage cash flow.
When it comes to regulation, “we welcome that,” he said.
“Our philosophy is: try to be as transparent and straightforward with our customers as possible,” MacAvoy continued. “That puts us in a position where anything that comes down the pipeline, we’ve already been thinking about. We’re happy to work with [regulators], and we think it’s good for the industry. It validates that these new opportunities are here to stay and that the industry is maturing.”
In the face of potential regulation, MacAvoy said Fundbox will continue its pursuit of new ways to finance SMEs and mitigate risk, adding that the company is indeed exploring some new services but none that it will announce — yet. But what he did say is that the firm will focus on the small business client.
“How can we leverage all of the great innovations and developments that have gone on in the technology sphere?” he asked. “How do we leverage those to deliver value back to the SMB customer, who’s just trying to run a successful business and follow their passion to have a good life, to be able to buy their dream house or put their kids through college? Those are the things that get us excited and keep us motivated.”