Alternative Finances

BlueVine And What’s Next For Factoring

The year 2016 was not exactly a banner year for the alternative lending segment as many firms saw their business models crater and investors look for better things to do with their money.

BlueVine begs to differ — 2016 was, by all accounts, a pretty good year for their team. They took home a bronze medal at Innovation Project 2016 in the Best Small Business category, rolled out a line of credit products, signed a major partnership with Intuit to expand the reach of their products, lured some talent away from big name firms and then rounded the year out with a $49 million Series D funding round. They also managed to up their credit lines pretty notably — $250,000 to $2 million for invoice factoring and $50,000 to $100,000 for their business line of credit.

“We also got to $200 million funded, which is a nice milestone for us as well,” BlueVine’s Chief Revenue Officer (formerly Square’s head of sales) Eric Sager noted in a recent conversation.

But as well as things went for BlueVine, Sager noted, they do not control the seas in the larger ecosystem — which were somewhat turbulent in 2016, to say the least.

But BlueVine pushed through — and Sager says they are now on track for more growth in 2017.

How’d they do that?

A Tough Environment

Though invoice factoring is something of a “unique niche,” Sager noted, they weren’t immune to the turbulence in the broader alternative lending space.

“We are still part of a larger ecosystem, and it is hard to imagine as difficult a year as we had last year,” Sager said.

The issue wasn’t customer skepticism as much as it was investor skepticism. Customers, if anything, were looking for a greater diversity and range of offerings. But as firms with high levels of name recognition like OnDeck and CAN Capital suffered performance issues, investors of all stripes started feeling markedly cooler on the segment.

“It kicked off with Lending Club and just spiraled from there.”

BlueVine — with its speciality in invoice factoring and, more recently, 6-month lines of credit — is not a marketplace lender, Sager noted, and so it doesn’t have to worry about selling loans off of its books. That was a piece of good news in an environment where investors’ cold feet are an issue.

But they do have to borrow money to make their loans, he noted, which means they felt the ripple effects.

“We borrow from firms — and to the extent that they are taking a hit on another firm that has gotten into trouble, that makes them more skittish than they would have been 2 or 3 years ago.”

The good news, he noted, is that 2017 will almost have to be better — though perhaps it won’t quite reach the near frenetic levels of activity that were present before.

“I don’t think it will dramatically improve right away. But if you provide real value to customers and partners that everyone can clearly measure and market, equity investors see that, and it makes a difference.”

And BlueVine is all about making a difference — which is how it has charted its growth path.

Giving Customers What They Want

Invoice factoring isn’t a terribly well-known product outside of those businesses who use it, but it is a tremendously useful financing option for firms that can properly leverage it, especially on the 100 percent digital filing and settlement model that BlueVine claims it is unique in offering in the marketplace.

It’s such a unique service set, Sager says, that as they’ve thought about expanding as a firm, they’ve really considered how to build onto that factoring offering so that their suite of services becomes stickier — and more widely applicable — to their expanding customer base.

“Our client demand really drove the expansion — we had so much interest from factoring customers that wanted a line of credit that we knew there was a business line there,” Sager said, noting that customers found that combined, the two financing products allowed them to “manage their working capital in very sophisticated way.”

That product is still developing, he noted — there is additional demand for a longer-term line of credit product, particularly in the 12-24 month range, that the firm could be looking at rolling out as early as this year.

And that, he notes, is just one of the items on the agenda.

What’s Next

“We want to help customers manage their working capital better. That is our sweet spot,” Sager said of the bigger vision for 2017. “I think you are going to see us continue to launch new products.”

Working capital is the main pain point driving SMBs today — even in firms that are successful, cash flow is an issue that can be as little as one major equipment failure away from being crippling. BlueVine says it can alleviate that pain point by letting companies actually leverage their invoices against capital needs — and offers them access to a line of credit on demand.

Going forward, he notes, the goal is to grow — and continue to bring the benefits of their services to a larger market.

“You will continue to see us move into partnerships — and probably with some slightly larger customers — especially as we raise our credit limits and we are moving into companies that are doing $100 – $200 million a year in revenue.”

It’s an ambitious goal, but BlueVine did make a lot of progress in a single year when the headwinds were blowing hard on them.

Because, Sager noted, at the end of the day, they do something unusual — and he says, better than anyone else.

“What we do with invoice factoring — they are not easy products to replicate at scale, and we are the only company in the U.S. that is doing factoring 100 percent online. Elsewhere, it is a very offline experience.”

And businesses — particularly small (and increasingly not-so-small) businesses — are moving online and demanding a fully digital experience when it comes to financing their operating capital.

If BlueVine is ready to help them make that jump, 2017 looks like it might be a pretty good year, too.

Meet the 2017 crop of Innovators at Innovation Project 2017 — March 15-16, 2017 on the campus of Harvard University. Use VIP20 to get a 20 percent off the ticket price. Seating is limited and first come, first served.

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