On Feb. 18, 2015 we hosted our second Google+ Hangout: Learn What Online Funding Can Do For Your Business. A panel of alternative financing experts joined us to talk about tips for finding funding through online lenders. The panel included:
- Steve Strauss: USA Today Small Business Columnist
- Brett Baris: President, Credibility Capital
- Kathryn Petralia: CoFounder & COO, Kabbage
- Jordan MacAvoy: VP of Marketing, Fundbox
- Brock Blake: Founder/CEO, Lendio
- David Teichner: Chief Revenue Officer, ForwardLine
You can watch the entire Hangout here, but if you’re interested, we list a few highlights below:
What They Said…
Jordan MacAvoy, VP Marketing, Fundbox:
About: Fundbox offers small businesses short-term working capital and uses four pieces of information to approve a business in less than four days. They try to solve the problem of cash flow crunches and lack of short term working capital for small businesses.
“If you think about cash flow in a small business, the expenses that the business incurs are fairly regular, but sometimes that influx of capital is irregular. What happens is the business inherently has this cash flow crunch that occurs, where its expenses outpace its income. Through our platform…we actually pull in data from an accounting or bookkeeping system – so like a QuickBooks or a FreshBooks – and what we do is we allow somebody to advance an outstanding invoice.”
Fundbox’s platform allows small businesses to get access to working capital in as little as 24 hours. The platform is primarily met to combat cash flow crunches, which Jordan says actually occur very significantly in healthy, growing businesses.
“We really look at our product as the way for a business to invest, so maybe take that risk – taking the additional job that they maybe didn’t have the confidence to do, or hiring that additional employee.”
Expert Tip: “Do your homework, but don’t be afraid to go with one of these newer alternatives. You can read a lot of reviews on other businesses that are out there…there are lots of new options. There are lots of new products out there as well – so don’t feel like you only can use one specific type of product to get you through whatever you need to make your business successful. Do your homework and keep an open mind.”
Kathryn Petralia, Co-Founder & COO, Kabbage:
About: Kabbage provides lines of credit for all types of businesses through real-time technology platforms, which allow customers to visit the website and get funding in less than 10 minutes. Kathryn’s overview of the alternative funding universe is that every business is different, which is great because there are many types of options depending on what type of business you are involved in.
“If you are a business that’s been around for a long time and are generating a lot of revenue, then there’s a good chance you may be eligible for an SBA loan that you can get from your bank. If you need less capital, less than $100,000 or less than $50,000, then you might want to pursue an alternative lender that is going to look for less time to business or less revenue, or is going to be able to handle a lower dollar request.”
“Then there’s options like invoice factoring. A lot of companies provide those kinds of services as well. The questions is, How long do you need the capital? What are you using it for? What’s your ROI on that transaction? And what kind of business are you operating?”
Most small business owners who use Kabbage also use credit cards in some fashion to finance parts of their company. But business owners struggle with using personal credit for their business because it can artificially deflate their personal credit and make personal and business borrowing more difficult. It is important to keep personal and business credit separate for these reasons and others, such as lenders checking on the credit of the small business owner, as well as the business credit file.
Expert tip: “Just be honest. Don’t try to hide the warts – every business has challenges. Be honest with the lender you’re seeking capital from because they really need to know the whole story and they may actually be able to help you if they know more about your business than if you withhold information from them.”
David Teichner, Chief Revenue Officer, ForwardLine Financial
About: FowardLine offers merchant cash advances and direct loans for small businesses. For a merchant cash advance, typically they look at the business’ recent credit card sales to determine what they call “business stability” – can this business afford a loan, will it help them grow, can they pay it back in a timely, responsible fashion? Through this analyzing, ForwardLine determines how much of the business’ credit card sales they will withhold based on the size of the loan and the business stability. Over a non-fixed term (businesses will take however long is necessary to pay back their advance), the business will pay back the money through their withheld credit card sales.
“The reason why a lot of merchants like this is that it’s extremely cash flow friendly. We had a customer renew yesterday, and one of the things the customer boasted about and excited about was that in the Midwest the weather has been brutal, and there have been many days where the business couldn’t really generate the revenue – some days the business had to close down, some days people just weren’t showing up – and those days the customer is paying us either nothing or very little because it’s a percentage of sales.”
Not all business owners prefer merchant cash advances, some like to have fixed terms, and ForwardLine has options for that as well.
Expert Tip: “Do your homework and understand who you’re talking to and who those folks are. Not only look at the reviews, but really understand the costs. Don’t just take at face value when they say ‘Cost X,’ really understand what are all the costs involved, what are the repayments – this ends up being a comfortable marriage between the lender and the borrower. We’re going to do our homework on you. Know that you have options, and make sure that you’re really comfortable with who that person is that’s going to be lending you the money.”
Brock Blake, CEO, Lendio:
About: Lendio is a small business marketplace that focuses on option, speed, and trust. Lendio recognizes the shift banks have made since the recession and works to match business with the alternative lenders who have rose to fill the gap in small loans left by the banks.
“What’s interesting is that since the recession hit in 2007, 2008 banks have been moving upstream – they’re focusing on loans larger than $1 million because that’s what they feel comfortable underwriting. They’re not going to be as innovative as these alternative lenders, they’re not going to be able to use technology the way these alternative lenders use it.”
Banks know that if they only deal with larger loans, then they can still require long form paperwork and other time consuming aspects of lending that can make getting capital take 30, 60, 90 or more days. Alternative lenders have come in to offer small loans that get capital to businesses faster. What Lendio aims to do is work with small businesses to match them with the right alternative lending, based on the data the business provides, be it a business credit card, a Kabbage loan, a merchant cash advance or something else.
Expert Tip: Plan Ahead. “I think there are a lot of situations where the business is healthy and it’s doing well and the business owners don’t want to get financing until this catastrophe hits, and all of a sudden this catastrophe hits and the business is in a bad spot, and that’s the worst time to get financing because most of the lenders are seeing the same catastrophe on paper. There are other times where you’ve got a very healthy business – you probably could get access to lines of credit or other things like that – so if you plan ahead, then when the catastrophe does hit then you’re prepared.”
Brett Baris, President, Credibility Capital:
About: Credibility Capital is a marketplace lender that gives two-year monthly pay loans to high quality small businesses. Market place lenders, like Credibility Capital, match lenders (institutions looking for yield) with borrowers (high quality businesses that are being overlooked by banks). Credibility Capital’s mission is to fill the gap between where banks aren’t lending and where credit cards come in. They feature an automated online application to help make it as painless as possible for small businesses to get access to capital.
Expert Tip: “Make sure your business credit profile is accurate, make sure it’s up-to-date. Reach out to Dun & Bradstreet and speak to a credit advisor and make sure that what the public views in terms of your business and your background is accurate. And like the other panelists said, know your products and do your research.”
Online lenders use many different types of criteria to decide if or how they are going to issue a loan. One of those could be your D&B® business credit profile. Check out CreditSignal®* to start monitoring changes to your company’s D&B® scores and ratings and become more familiar with your business credit file.
Lookout for our next Google+ Hangout in March: Can Your Business Get a Bank Loan in One Session?
*CreditSignal only indicates that your D&B scores and ratings have changed and alerts you when your business credit file has been purchased. To view actual scores and ratings and learn about what industries are purchasing your D&B file, we recommend that you upgrade to one of our business credit monitoring or credit building solutions. Please note, due to the proprietary nature of these inquiries and inquiry requests, only the industries in which the purchasing customers reside will be revealed.