B2B Payments

The Last Holdout Of Alt-Finance Innovation

Let’s face it: the invoice financing business is, well, a bit dull compared to the rest of the alternative lending space. Eyal Lifshitz, co-founder and CEO of factoring firm BlueVine, knows this. Factoring, he says, is as old as time, but has seen hardly any innovation.

It’s why BlueVine was created in the first place: to bring alternative invoice financing into the 21st century, online and automated.

“The way we came into this industry is very different,” Lifshitz recently told PYMNTS in an interview. “Many times, the way financing companies think is, ‘how do I maximize my profit? How do I reduce risk?’ And only then do they start to think about the product or service.”

But in launching BlueVine, Lifshitz said he had an opportunity to approach factoring in an entirely new way. “Because our priorities were switched around, that allowed us the flexibility to define everything about how this service can be beneficial to small businesses,” he said.

In factoring, that new approach begins with an online platform.

Going Digital

“We are practically the first ones that are really making this an online product,” Lifshitz said. “In our case, that means you can open an account online. Just that onboarding makes it a completely online product – which sounds very, I guess, basic, especially in the online lending world where everybody onboards online. With factoring it’s just not the case.”

Invoice financing traditionally required a whole bunch of paperwork, and the process takes a lot of time, Lifshitz said. Plus, companies often have to physically meet with a client, and servicing is usually an offline process, too. When it comes to factoring, Lifshitz said “advanced” can simply mean companies can accept an invoice via email – yet still, most require them to be faxed, or even physically mailed in.

It’s a process based on how factoring firms manage risk assessments – another aspect of the industry that’s been done this way “forever,” Lifshitz said, and yet another aspect of the industry that needed a change.

“More and more businesses are doing their invoicing online anyway, even in the last two years, especially from the switch from QuickBooks desktop to QuickBooks online. If they’re already doing invoicing online, why not also get financing online for their online invoices? Why do they need to print a copy of it, and send it to their factoring company?”

[bctt tweet=”If SMEs are already doing invoicing online, why not also get financing online?”]

In allowing for online onboarding, plus online servicing and invoice submission, BlueVine is making for a far more efficient financing tool for small businesses. “The way we are underwriting is very much data-driven,” Lifshitz said. “The small business owner doesn’t necessarily care about what’s going on under the hood, but what it translates to is much faster processing time.”

He added a “good chunk” of advances are automatically processed, meaning small business owners can see funds in their accounts within a few hours, as opposed to the at least 24 hours that SME owners have to wait through other factoring firms.

It’s Not ‘Banks vs. Alt-Lenders’

The versatility of the alternative lending sector to innovate, experiment and embrace high-tech is part of its appeal to small businesses unable to access finance from a traditional bank. The rise of alternative financing has some banks worried, but according to Lifshitz, the presence of BlueVine in the invoice financing industry doesn’t amount to an “us versus them” mentality.

“I think the conversation about banks is less of a relevant one and I’ll tell you why,” he explained. “If you can get your cash from a bank, and if you can get it fast enough, then I think you should. The rates that banks charge are probably the lower pricing available. If that can happen, then by all means, they should get it from a bank.”

Lifshitz said BlueVine is actually happy when one of their companies graduates to a bank. “It means they’ve matured, and it’s a good sign for them,” he said. “The issue is that four-out-of-five small businesses can’t get bank financing,” whether it be because the business owner’s credit score is insufficient, or a bank is not familiar enough with a startup’s industry, or an SME is viewed as too much risk.

That’s “the reason why alternative financing exists in the first place,” he said.

Time For A Change

It’s a good thing players are beginning to innovate in the factoring space, because, according to Lifshitz, not only has factoring been around forever, but thanks to the nature of the buyer-supplier payment relationship, it’s probably here to stay.

“The fact that large companies are stretching out their AR cycle is not new,” he said. Even with faster payment models and government encouragement, large corporations will always likely stretch out payment terms for small suppliers. “They take advantage of their power versus suppliers. I don’t think that will ever completely change.”

“That’s the issue. I don’t think that’s going away, and suppliers are just going to need to deal with it. Not all suppliers seek financing. We’re here to help the ones that unfortunately do need it.”

And small businesses, he added, are ready to take that help in high-tech fashion.

“Small businesses are becoming much more tech-savvy,” Lifshitz said. “The average business owner’s age – I don’t think I’ve shared that statistic – is about 40. It’s not just 25-year-olds who are tech-savvy. My dad is a 70-year-old and he uses email and Facebook. It’s not just the property of young people.”

With small businesses already using online banking, ERP and invoicing services, it just makes sense that their factoring services would go digital, too, Lifshitz explained.

[bctt tweet=”People are already using online services, so why not get their financing online? It’s about time that factoring also went online.”]

“People are already using online services, so why not get their financing online? It’s about time that factoring also went online,” he said. “It’s just one of those industries where it’s not been very tech-savvy before, so it’s taking a bit of time.”


Exclusive PYMNTS Study: 

The Future Of Unattended Retail Report: Vending As The New Contextual Commerce, a PYMNTS and USA Technologies collaboration, details the findings from a survey of 2,325 U.S. consumers about their experiences with shopping via unattended retail channels and their interest in using them going forward.