Fundbox Clinches $40M Series B for Short-Term Lending Product

[Updated 3/19/15, 6:20 pm. See below.] Fundbox, a short-term lender for small businesses that charges a fee during repayment, is focused on an issue businesses of every size have: cash flow.

The San Francisco-based company helps business owners manage finances, like bills and invoices that customers haven’t yet paid. An owner can sign up for for the Fundbox service without an application, instead uploading its invoice or tax records from a program such as Quicken to the startup’s online system. The Fundbox software uses that data to run what amounts to a credit check, assessing the financial risk of the company, gauging it against the rest of Fundbox’s portfolio, and checking to ensure it’s a real business, said CEO and founder Eyal Shinar. [Updated to add CEO comment and context on loan underwriting.]

If all goes well and a business is approved, it can request cash from Fundbox as an advance for an invoice that hasn’t yet been paid to ensure it has cash flow to cover bills. Fundbox provides terms on the loan upfront, and advances cash to the client immediately. Over as many as 12 weeks, the owners must repay Fundbox with the fee included, typically a charge of about 5 percent to as much as 25 percent, depending on the duration and amount of the loan, as well as the company’s financial risk, Shinar said. [Updated to add context on business operations.]

Fundbox received backing today in the form of a $40 million Series B round led by General Catalyst Partners. New and existing investors also contributed, including Khosla Ventures, Shlomo Kramer, Blumberg Capital , and NyCa Investment Partners, among others. Former CitiGroup CEO Vikram Pandit has also backed the company.

“We can underwrite very quickly,” Shinar said. “If you can get the machine to do what credit officers do more accurately and faster, we don’t have the same limitations (as traditional banks).”

Fundbox says its software helps businesses avoid pitfalls of money management, such as feeling forced to wait until they have cash on hand from their customers to pay their pay bills. Fundbox doesn’t charge extra for early repayment.

“Invoices are almost always paid 30, 60 or 90 days after they were issued,” the company says on its website. “This often leaves businesses struggling with cash flow gaps that hold back their growth and keep them from reaching their full potential.”

General Catalyst managing director Hemant Taneja says that small business services are an interesting area in which to invest partly because small business owners behave like consumers. That allows the businesses General Catalyst invests in—such as mobile payment provider Stripe or ZenPayroll—to scale quickly.

“Fundbox uses complex data science to assess the risks around each invoice and finance against them individually,” he said. That can be difficult because invoices are typically self-reported in accounting software, said Taneja, who joined the company’s board.

Founded in 2012 by Eyal Shinar, Yuval Ariav, and Tomer Michaeli, Fundbox plans to use the new funding on innovation and product development, as well as for marketing.

David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at dholley@xconomy.com Follow @xconholley

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