B2B Payments

QuickBooks Fills In Its SME Financing Gaps

With all of the financial data that QuickBooks has at its fingertips, it’s no wonder why the accounting platform can link up with alternative lending partners to offer an array of financing options to its small business users. But according to Jeff Kaufman, QuickBooks Financing’s project leader, there was something missing.

“We definitely noticed a hole in terms of invoice financing,” he told PYMNTS.

In an announcement earlier this month, QuickBooks announced that it would be filling that hole through the help of Fundbox. But the service is not a traditional factoring tool. Kaufman explained how, and why, QuickBooks decided to go with Fundbox to tap into this type of lending service for SMEs.

According to Kaufman, QuickBooks first went to Apps.com, its website used to help app developers create new products that can integrate into the QuickBooks platform. Fundbox, it turns out, was the highest rated invoice financing tool on the site.

The high user ratings caught QuickBooks’ eye, but it was the way Fundbox treats the small business invoice that sealed the deal, said Kaufman.

"We love the fact that when using the Fundbox product the small business customer retains direct contact with their own customer, whether their billing or payment information changes,” he explained. “It’s really great that the small business still gets to manage their invoices, but at the same time they’re unlocking that working capital."

The ability for SMEs to maintain ownership of their invoices is what sets Fundbox apart from traditional factoring services. And QuickBooks isn’t the only one who’s taken notice of the company. Last month Fundbox secured $50 million in new financing from Spark Capital Growth, among other investors. At the time, the company said it had doubled its revenue every quarter for seven quarters in a row (though itdid not release exact numbers).

With so many alternative lenders on the market today, why is Fundbox so successful?

Kaufman said that the invoice financing tool provides more than one service to SMEs. First of all, he explained, small businesses cited working capital as their No. 1 pain point when surveyed by the company.

With Fundbox, these users “are able to get the cash, then start their repayment cycle, and once an invoice gets paid off they can completely repay,” he said, adding that the tool creates a “seamless” experience for SMEs that need working capital.

Secondly, invoice financing adds a type of access to working capital that Kaufman said is a piece of the overall small business financing landscape: faster, short-term financing, which can supplement a business’s existing long-term loans.

"By having a line of credit in place where, in the background, small businesses know they have availability of working capital if they need it – it’s a great option,” Kaufman said. “Where I think the invoice receivable is key is in this day-to-day working capital space."

[bctt tweet=”‘The invoice receivable is key is in this day-to-day working capital space'”]

So while SMEs may have a long-term loan to fund major purchases for, for example, equipment, these companies can still access funding based on their changing daily needs.

But SMEs can access working capital on the fly if it’s not offered to them in a similarly hasty fashion. According to Kaufman, QuickBooks found that, when going the traditional route for financing, small business owners spend an average of 33 days gathering all of the data necessary to apply – and an additional week-and-a-half until a decision is made.

"This whole 33-hours and the week-and-a-half is resulting in lost opportunities for these small business owners,” he said, adding that an integration into QuickBooks – along with all of the financial data that comes with it – makes the small business application process far more automated.

Kaufman explained that small business applicants can review the data being sent to Fundbox beforehand. “This ability to have access to the data and really make business information the focus of the loan decision is critical,” he added.

In business, speed is key. And that’s why late payments on small business invoices is such a headache, Kaufman said.

"It’s a problem in the U.S., and it’s becoming an even bigger problem,” he said. “A large portion of large companies pay late because they can, and it improves their working capital. We see with small businesses working with larger companies, or even midsized ones, that their days sales outstanding are increasing and increasing."

While SMEs wait longer to see their invoices settled, Kaufman said that the integration with Fundbox means small businesses can finance their invoices in only 15 days. But with DSO on the rise, he said the market is likely to see an increasing need for these types of invoice financing options.

When putting it all in perspective, Kaufman said QuickBooks’ new deal with Fundbox, along with its other financing partnerships, all aims to make life easier for small business owners, who already struggle enough.

"At the end of the day, for the small business owner, we see this time and time again in Pro Back Office: They’re just so busy, and they’re trying to focus on growing sales and on their passion for growing the business overall,” he said.

[bctt tweet=”‘At the end of the day, for the small business owner, they’re just so busy'”]

Looking ahead, Kaufman added that QuickBooks will be looking closely at potential patterns that emerge among users of the Fundbox tool in an effort to gear the company’s financing services toward the small business owner strapped for time, and strapped for cash.

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