Small Business Loans Are Difficult These Days
There are many different ways for a business to get past a cash flow problem. In years past, one way to get around that was to take out a small loan from your local business bank. I remember back in the ’80s taking the bank president out to lunch at “the country club” to get to know him before working out a deal.
Unfortunately, in recent years, it has become very hard to qualify for that kind of funding. There has been an upsurge in new, smaller businesses in recent years, and they often don’t qualify for a traditional bank loan. Lending standards have tightened, also. Beyond this, this kind of business loan is often for a large fixed amount, perhaps with payments spread out over a long period of time, and the payments for the large amount become a cash flow problem themselves.
To make matters worse, the Days Sales Outstanding (DSO) rate, or the time between when an invoice is issued and the payment is received, has been increasing in recent years.
Improving Cash Flow with Fundbox
Fundbox is a service that will look at your accounts receivables and give you what are essentially small, short-term loans based on these invoices. Application, approval, transfer of the funds to your account, and payments are all done automatically and simply.
The service integrates with a number of accounting products to make the process as simple as possible, and they use advanced underwriting
At the time I’m writing this article, Fundbox integrates with QuickBooks Desktop, QuickBooks Online, FreshBooks, and Xero. Others under consideration (depending on user feedback) are Harvest, Sage One, Netsuite, and Wave.
Overview of Fundbox
Here’s a quick overview of how Fundbox works. I’m working with a demo account – I couldn’t run “real” receivables through this system (as a consultant, I don’t have receivables, I always collect payment in advance).
You can create an account at https://fundbox.com/ in a few minutes. As a part of that process, you’re asked which accounting product you’re using.
Figure 1: Selecting the accounting product from which to import invoices
Note that if you’re using
Once the connection is established, Fundbox will retrieve your invoices from the accounting product and gather other information, which can take anywhere from a few hours to as long as a day. I’m told the typical approval usually takes a couple of hours.
The folks at Fundbox wouldn’t provide me with details as to what exactly they’re looking at when making their evaluations on the level of
After approval, you’ll see a screen similar to Figure 2. This shows the credit you have been approved for, both total amount as well as the limit per any individual invoice. You also see a list of your current invoices.
Figure 2: Invoices available for funding
The limit per invoice may be lower than the total limit, due to Fundbox’s analysis of the risk in your account.
OK, so now that we see the invoices from our accounting system, how do we get a cash advance and what will the cost be? Simply click the Clear This Invoice window and you get an immediate response, showing you the details of the cash advance (Figure 3). You see the amount they’re providing you, your payment amount, and the number of payments. Your cost is shown, both as the total amount as well as the total amount of fees you’ll pay (in small type under the “You Return” figure).
Figure 3: Quote on cash advance for an invoice
Up to this point, there has been no cost to you. No charge to open an account, no monthly membership.
If you decide you want to go forward with the cash advance, simply click the Where Should We Send It? button. If this is your first cash advance, you’ll be asked to enter your bank information (Figure 4).
Figure 4: Enter your bank information
Keep in mind that you have been preapproved for this cash advance. The money will be deposited in your bank account on the same or next business day.
You’ll get an email (Figure 5) that summarizes the payment schedule. At this time, the payments are always scheduled over a 12-week time period.
Figure 5: Email acknowledgement of funding
Money should be in the bank account the same or next business day, although the Fundbox system says it could take up to three days.
What could be simpler?
Changing Your Mind
If times are good, you may decide you want to pay off the cash advances more quickly than scheduled. This is very simple to do, and there’s no prepayment penalty.
Simply click the Edit Repayment Plan button on a cleared invoice.
Figure 6: Editing the repayment plan
The repayment window (Figure 7) shows you how much you will save by closing this invoice advance. Again, there’s no penalty for paying early. Fundbox says it wants to encourage responsible borrowing, and every step is made easy for you.
Figure 7: Paying off the cash advance ahead of schedule
If you pay this off (by clicking Pay Remainder Now), you’ll get an email summary and reminder of how much you need to have in your bank account.
Figure 8: Email notice when closing off payment
Some Technical Details
A few notes:
- Once you have set up the relationship with your accounting software and your bank, you don’t have to do that again.
- Fundbox will pull in new invoices periodically. Usually this will refresh each time you log in to your account, but if you’re using QuickBooks Desktop, it also depends on the sync schedule you have for Sync Manager.
- At the time I’m writing this, the product is not feeding information back into your accounting product. That’s something Fundbox has under development. If you clear invoices this way, you’ll have to create accounts for the loans and add payment and receipt information into your account manually.
- Payment schedules are always 12 weeks.
- Your banking information is stored with Wells Fargo, not in a Fundbox database, so your banking information should be secure.
Working with Accounting Professionals
Bank of America’s Fall 2013 Small Business Owner Report states that, according to its research, 75% of small business owners go to their
Figure 9: Small business owners seeking guidance from “trusted advisors”
We’ve talked about being a “trusted advisor” and how important it is for the accounting professional to help his or her clients. Here‘s a funding source you can recommend as an option for clients who need this kind of help.
Fundbox has an Accounting Professional Partners program that provides you with educational materials as well as a referral fee for clients who sign up and clear an invoice (talk to Fundbox about the details on how to qualify). That brings up an interesting question: Can you be a trusted advisor when you’re also getting a referral fee? In Doug Sleeter’s article What SMB’s Want from Accountants, he points out that research shows SMBs want the recommendations, but they don’t want their accounting advisor to be “involved in the sale.” On the other hand, this kind of revenue can help the accounting professional’s bottom line. My view is that if you engage in this kind of program, make sure your clients know about your involvement. Just because you’re getting a referral fee doesn’t mean it’s a bad deal for your client.
Similar Products
I haven’t done an extensive search for similar products that integrate with accounting products that we track, but I don’t think this kind of integration is available in other products. That makes it tough to compare, as they all do different things. You have to look at each of the options to evaluate what they do when compared to your needs.
Here are a few products to consider. Each of these works with at least one accounting product, such as QuickBooks, QuickBooks Online, or Xero.
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Kabbage is a cash advancement service (which I haven’t reviewed) that uses your financial info (including info from your accounting product if you wish) to provide you with funding. It’s not a receivables
management product, and it differs in several ways from Fundbox. - Funding Gates is one of several receivables management products (which I haven’t reviewed). This isn’t a cash advancement product; rather, it helps you manage your receivables better for a monthly fee (there’s a free play for a small volume).
- ZenCash is another receivables management product (see Stacy Kildal’s review).
Some Questions and Conclusions
I’ve only looked at this for a short time with a demo account. Everything I’ve seen so far seems to work VERY smoothly. I like the concept!
Here are some points to consider:
- You can’t see all the details of the cash advance. You see just the total cost. I do like seeing the TOTAL cost, but I would like to see the details of the rate being charged also.
- I don’t see any reports. For example, what’s my total commitment for repayments in a month? I think that would be very important for me to see, particularly since the scheduled payments aren’t going to be posted in advance into my accounting system. Currently, Fundbox says it will supply this information upon request, by email. In addition, Fundbox is working on adding a dashboard that should be able to provide this kind of information.
I like what I see, but I’ll admit that I can’t say how competitive the rates are on these cash advances as I have no way of comparing this (from a demo account) with anything else. Fundbox representatives claim that their rates are very competitive. One of the nice things about this is that you can see what the cost of a cash advance would be very easily without having to make any commitment up to that point.
I also like the ability to pay off a cash advance easily, without any prepayment penalty.
The system works very smoothly, and the speed of getting approval seems to be excellent. This certainly is easier than taking the local bank president out to lunch! I’ll be interested in seeing how Fundbox handles the integration to get the loans and payment information back into the accounting system.
Fundbox is an option worth investigating if you have these kinds of cash flow issues.