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 the Fundbox team about their company, the business loans offers, and services.
- We did a little research and found out that you have been on the market for nearly 10 years now. Can you tell us a bit more about the idea, story, and history behind Fundbox?
Our story begins with the problem we’re solving, and that is small businesses have limited access to working capital. There are over 30 million small businesses in the U.S., and there were 4.4 million new businesses started in 2020 alone. The average small business has $80K in outstanding receivables, at any point, there’s $900B in aggregate unpaid invoices.
For every B2C small business, several B2B small businesses are powering them; think about the accountants, cleaners, and food delivery behind a single restaurant. Of the country’s 30 million small businesses, about 20 million are B2B. These businesses in particular need access to capital 100% of the time to survive, especially because they have the added challenge of waiting 30-90 days to get paid. Their cash is often tied up in receivables, inventory, payroll, etc.
Our founder saw this firsthand growing up. His mother owned a staffing agency and while the business was successful, she didn’t get paid for months at a time. Those conditions made it impossible for her to invest in or grow the business.
That’s where Fundbox comes in. We are a financial platform for small businesses, and our mission is to unlock growth for millions of small businesses by providing fast and easy access to financial tools.
- What were the challenges that you faced when you started the company?
We didn’t have anyone with a credit background for the first five years. We were operating from a belief that to disrupt the status quo, you can’t hire the status quo. We approached the problem from a customer-first mentality: the small business owner’s day-to-day challenges, needs, and desires, and then we built everything else around it.
Above all, we knew we wanted to build a long-term partnership with our customers; it had to be more than a transactional relationship. We created a business where we only make money from customers who use us repeatedly and successfully.
We made product decisions that veterans of the credit industry would probably find surprising. For example, we removed all friction in taking or returning funds – early repayment without penalty, no origination fees, complete upfront transparency on fees, etc. These steps may not optimize unit economics, but it does optimize for a long-term relationship with our customer.
- Can you explain how your AI-powered platform works?
Fundbox is on a mission to unlock growth for small businesses by providing fast and easy access to financial tools. AI has been core to our approach, allowing us to scale quickly through automation while increasing access to capital through superior predictions and credit decisions.
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 uniquely to understand customer needs and become more accurate over time with more data. We’ve invested over $100 million into our AI infrastructure, which continually improves and becomes more accurate with more data.
- How did the COVID-19 pandemic affect the small business loans industry in general, and Fundbox in particular?
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.
- Fast forward five years and then ten years – what is going to change in the world of small business loans?
There are two big opportunities that we are looking forward to in the immediate future:
- 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.
- 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 many transactional and financial products to serve our customers. We’re just scratching the surface of what’s possible – ultimately we aim to provide a comprehensive suite of financial tools and services for small business owners.
- Fundbox was recently named as the “Best Decision Management Company” in AI Breakthrough Awards. What does this award mean to you?
We’ve invested over $100 million into our AI infrastructure, and it only improves and becomes more accurate with more data. We’re proud of the resulting technology that has been integrated throughout the company, which enables us to make better decisions across the entire lifecycle of the customer, from identifying prospects to underwriting and ongoing assessment. Ultimately, our AI platform drives a superior customer experience and better business outcomes.
- What advice would you offer to anyone considering taking a small business loan?
Every business hits a rough patch now and then. And when you hit one, it’s helpful to know what financing options are available in advance; speed-learning various financing options can add to the stress of the situation.
Applications offered by digital-first business credit platforms are often quick and easy, with lighter requirements than compared to a traditional bank. Some platforms transfer funds into your account as soon as the next business day (which can be a lifeline in a pinch), and provide complete fee transparency, which creates a superior customer experience.
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.
- Are there any other points of wisdom that you would like to share with our audience?
We are bullish on the growth of the small business economy post-pandemic. After bearing the brunt of the negative effects of COVID closures, small business owners are more determined and hopeful than ever, having started 4.4 million businesses in 2020, the first time in history that new businesses have increased during a recession. We look forward to continuing to serve these entrepreneurs and finding new ways to unlock growth for their businesses.
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