Technology is helping firms access capital with speed and manage cash flow with aplomb. For small and medium-sized businesses with near-term needs for financing, credit remains an important facet of daily corporate life.
With an eye on that need, BlueVine, the FinTech firm that has traditionally staked its claim in the factoring arena, has expanded into lines of credit (LOC), which allows firms to obtain access to funds on an as-needed basis. The new offering, dubbed FlexCredit, was announced earlier this month. The lines lie within a range of between $5,000 and $30,000.
In an interview with PYMNTS, the firm’s founder and CEO, Eyal Lifshitz, said the credit option represented a natural extension of its invoice factoring business, which is done exclusively online. The time is right for revolving lines, the company decided, “as the genesis for FlexCredit came from our existing users. They’d been flat out asking for lines of credit."
“And, in a simple example,” Lifshitz said, “a supplier could factor an invoice as part of a working capital cycle,” but upon the need to buy inventory to help satisfy demand, could tap into an LOC to fund and complete inventory needs. The fact remains, said Lifshitz, that LOCs are more easily used for purchases that would typically be “within a few thousands of dollars,” whereas invoice factoring typically involves much larger amounts.
Though FlexCredit is meant to satisfy the needs of enterprises within both the B2B and B2C realm, Lifshitz told PYMNTS that, within the B2B use cases, among the more frequent niches are wholesalers, as well as services firms with project-based business models — say, a consultant who may have large scale revenues of $50,000 to $100,000 tied to just a few clients and is loathe to factor invoices to get cash. That business owner may, in fact, have small expenses that must be satisfied (payroll, for example), while waiting for client cash to come into coffers.
As technology has streamlined the process of obtaining funding, the firm has brought the LOC application to bear on a few key steps, including financial history of the applicant, connecting bank statements (and bank accounts for fund transfer) to the process and back-end accounting software that syncs with BlueVine. For this type of platform, said Lifshitz, “you need deep tech to do this,” likening the revolving credit process to a “micro-underwriting system, where firms draw on their LOCs every day and, in some cases, several times daily.
One advantage LOCs have over other quick funding sources, said Lifshitz, is the relative affordability of having such “everyday financing,” as he termed it, over methods such as merchant cash advances (MCA). As has been well-documented, MCAs can have APRs that top 100 percent or more, with possible cash crunches looming for businesses that are quite small or are trying to get off the ground.
As LOCs act as a “cushion” for SMBs, said Lifshitz, the average credit lines (which allow for replenishment as repayments occur) thus far through FlexCredit have been roughly $15,000 to $20,000, with interest rates as low as 18 percent APR. The eventual aim will be to extend that top-end limit of $30,000, said the executive.