Fundbox CEO On Landing Growth Capital, And Fixing The Net Terms Economy

The U.S. economy is reopening bit by bit, and consumer-facing Main Street small- to medium-sized businesses (SMBs) wait with bated breath to see if top lines and cash flows will return.


Stimulus payments have helped, perhaps just a bit, but looking beyond the pandemic, SMBs operating in the B2B space must confront the challenge of slow payments. The “net terms” economy hurts SMBs, and during economic downturns, buyers stretch out payments. It’s a $3.1 trillion problem in the U.S. — that’s the amount estimated by Fundbox and PYMNTS to be tied up in receivables on any given day as buyers take 30, 60, 90 or more days to pay.



Fundbox, which offers credit and invoice financing, said Tuesday (May 26) that it had received a fresh equity investment from MUFG Innovation Partners Co. Ltd., the corporate venture capital arm of Mitsubishi UFJ Financial Group.


With the latest financing, MUFG Innovation Partners tripled its investment in Fundbox’s Series C round announced in September 2019, bringing the total equity funding in the round to almost $200 million.


In an interview with Karen Webster, Eyal Shinar, founder and CEO, said the investment comes as Fundbox has seen rising demand for its offerings, including a doubling in demand for Fundbox Pay. Fundbox Pay is a payment and credit solution focused on SMB B2B transactions in the U.S. launched a bit more than two years ago.


Along the way, as might be expected, Fundbox has gained granular insight into the challenges and opportunities facing the B2B space amid the pandemic and recession. As Shinar told Webster, Fundbox Pay customers started facing supply chain pressures as far back as February, especially for those companies sourcing parts from China.


“It was more of the gradual chronic pain,” said Shinar. “By the time China was opened, the U.S. was shut down, so these firms got stuck with more inventory.”


And in a bit of a surprise, he said that during the first quarter, Fundbox started to get interest from larger companies who were (and are) relatively secure from a revenue and cash flow perspective but wanted to help solve the cash flow issues of their buyers.


There’s a growing awareness, he said, of how technology and platforms can, through a B2B payment and credit network such as that offered by Fundbox, improve the operations of a $21 trillion ecosystem with net terms and payment plans for approved SMBs.


In fact, Fundbox said with Tuesday’s announcement, despite a modest increase in losses seen early in the pandemic, key portfolio health indicators are now back at, or better than, pre-crisis levels.


Shinar said that Fundbox had started to anticipate a recession a few months ago (and credit models adjusted for that), although not at the levels in which we find ourselves today. In addition, Fundbox’s loans are relatively short in terms of duration, which affords the company some capital flexibility.


“We have very minimal to non-existent exposure to restaurants, coffee shops, hair salons,” he said, touching on the segments hardest hit by shuttering caused by the coronavirus. 


Advanced technologies such real-time data access, machine learning (ML) and automated credit management, Shinar said, can “streamline the [B2B payment] process in a way that minimize probability of a disaster scenario.” That’s to say that such models are impervious to exogenous forces. Shinar said that risks still remain, especially if the crises drag on for several more months.


Chief among those risks is that people do not come back to brick-and-mortar haunts, or start to shop again for items other than the barest of necessities.


For now, he said, Fundbox’s data indicates that businesses on its platform have more cash in their proverbial coffers.


“I wouldn’t celebrate yet,” he said, “because some of it is from real business activity, and some of it is from just stimulus money, and eventually stimulus money is going to run out.”


Thus, the improved liquidity may prove to be temporary.


Shinar said that the B2B space is one where there is generally less tech-driven innovation when it comes to underwriting the capital and operating needs of Fundbox’s B2B firms spanning engineering, manufacturing and eCommerce.


Although some of these segments have indeed been impacted by the pandemic, they have proven to be resilient. Part of that resilience comes as wholesalers and manufacturers can pivot away from, say, smaller retailers to the Amazons and Walmarts of the world.


The pandemic has trained a spotlight on the fragility of smaller firms that power the U.S. economy.


“Part of the reason those business are so fragile is because they generated the revenue, but they didn’t get the cash yet,” he said.


The wait for top line to translate to operating cash flow can last longer, even during a substantial crisis, and time is in short supply.


“It’s not a Fundbox issue or a Fundbox customer issue,” he said of payment frequency and liquidity. “It’s an issue that affects 65 percent of the economy, it can have ripple effects — and can mean the difference between whether businesses live or die.”