Elon Musk famously said starting a business is like staring into the abyss while eating glass. But you don't have to set a goal like privatizing space exploration or electrifying the global vehicle fleet to feel the terror of uncertainty that comes with paying yourself. As soon as you are in any way self-employed, from gig economy side hustler to the founder of a brick-and-mortar business, you know what it's like to face expenses while waiting for payment to come in. Two startups have organized accordingly.
If you do your invoicing with QuickBooks, Freshbooks, Xero, Harvest, InvoiceASAP, Clio, Kashoo, Jobber, Zoho, or PayPal, and you have been in business for at least three months with invoices that will add up to at least $50,000 over the course of one year, Fundbox might be your solution. It pays your outstanding invoices and then you pay it over 12 or 24 weeks.
There is certainly demand for help floating the cost of materials, services, equipment, and the many other costs that appear in operating a business. Fundbox's own research revealed that nationwide, the average SMB is waiting on $84,000 in outstanding invoices.
Its clients distribute primarily across three industries. Those are professional services, particularly marketing; trades such as construction and landscaping; and manufacturing.
It works like this: You enroll with your name and email address, then link the invoicing system you use. Fundbox analyzes your invoices and payment cycles to determine a credit line, and to import the accounts you'll pay once you're set up. The process can take as little as 30 minutes. You then log on to view a simple, user-friendly dashboard with your accounts receivables listed, to issue payments directly from Fundbox.
You choose which bills to pay by clicking on that account's 'Draw Funds' option, then choose a 12- or 24-week repayment term with associated weekly payment amounts (after interest) displayed, and the weekly fee you're paying disclosed. You only pay interest on the funds you use; that is, you're not paying interest on the total amount you're approved for from day one.
Fundbox's closest competition is BlueVine, which also analyzes your invoicing system in place of your credit report to determine your ability to repay a loan, but operates a bit differently. First, it's only the initial review of your financial picture that requires just a soft pull and a look at payments you're soon to collect from clients. That is touted as an easy five-minute application process, but once you have accepted the terms and are onboarding, the company will do a hard pull. Interest is based on your financials and your FICO score.
It integrates with QuickBooks, Xero, and FreshBooks, and fronts you cash against a percentage of a pending invoice's total amount. That percentage is the invoice total minus your interest rate and a reserve amount BlueVine keeps until your client pays the invoice. Your customer then pays that invoices directly to a BlueVine through an account that is created in your name, complete with its own PO box.
It's a slightly more à la carte version of factoring, in which your accounts receivable function as a kind of collateral on a line of credit.
As for how the interest payments work, Blue Vine Risk Manager Kanishka Kanna explained via email with a 5 percent example, "Interest is collected on the invoice once the debtor payment is received by BlueVine [via the customer's individual account], and the remainder is sent to the client. For instance, if we factor a $100 invoice, $80 is advanced to the client. Once the $100 is received from the debtor, we retain the accumulated interest (e.g. $5) , and send $15 [reserve amount] to the client as a rebate."
DailyPay is a third-party version of Uber's Instant Pay or Lyft's Express Pay: Faster access to gig economy earnings. The company charges a flat fee for pay advances to the contractors of DoorDash, Grubhub, Fasten, Shiftgig, and EatStreet.
The brainchild of a former Goldman Sachs managing director, it first gained notice for advancing pay to Uber drivers, back when Uber's Instant Pay was not as quick as Lyft's Express Pay.
However the company parted ways with Uber in summer 2016, a spokesperson said, to focus on a broader array of partnerships beyond the on-demand sector. The company now offers payroll advances to standard staff employees whose employers choose DailyPay as an available staff benefit. It integrates with widely used payroll providers like ADP and Paychex.
DailyPay's faster delivery of earnings provides help in picking up auto gas, car maintenance, and other expenses that come from driving and delivering food on-demand, with payment into your bank account (minus its fee) either instantly or on the next business day.
Instant payment is $2.99. Payment the following business day is $1.25. Both are flat fees per day.