Startup Fundbox updates B-to-B credit for online marketplaces

Fundbox is bringing the concept of trade credit to the digital world.

The startup is launching a set of application programming interfaces that B-to-B marketplaces can use to embed Fundbox’s payment and credit service into their checkout processes.

Fundbox made a name for itself by integrating with accounting software like Intuit’s Quickbooks and making quick loans to small businesses based on their receivables and cash flow. Last year, it began integrating its automated lending service with several software programs commonly used by its borrowers.

In March it launched Fundbox Pay, which expands the idea to payments and credit between small businesses. Using Fundbox Pay, a small business that has provided a product or service makes a request for payment and gets paid immediately by Fundbox. The seller pays a 2.9% transaction fee in return for immediate cash flow and not having to worry about the buyer defaulting.

Fundbox sends a request for payment to the buyer. (Any buyer not in the Fundbox network is encouraged to join.) The buyer has 60 days to pay without charge. After the 60 days, a buyer has the option to continue to carry the balance by using Fundbox’s line of credit for up to 52 weeks at a rate of 0.38% per week.

Fundbox’s underwriting software pulls data from accounting systems, invoicing systems, payments, public records, web interactions, social networks and tax returns. It uses artificial intelligence to assess the creditworthiness of the company and can render a credit decision in minutes based on the business’s incoming and outgoing invoices. Borrowers pay by the week for whatever credit they use.

“The deeper we got, the more we realized there’s a large variety of ways in which businesses interact with each other, and that rather than trying to build our own integrations with each and every variant, it made sense to take the platform path, which is build out the APIs such that different folks could bring the goodness of Fundbox Pay into their products,” Chief Operating Officer Prashant Fuloria said.

Trade credit works best in the offline world, where there are long-term relationships between buyers and sellers, he noted.

“It’s still problematic because of the need for a paper application, the need for bank references and trade references and the fact that I, the seller, am acting more like a bank, which I don’t want to deal with," Fuloria said. "All those problems become more acute in the online world.”

A typical user of the Fundbox Pay API might be an online steel marketplace that lets suppliers bid on buyers’ requests for proposal. In such a marketplace, buyers expect the same kinds of trade credit they get in the real world, Fuloria said.

Fitzroy, a toy and gift marketplace for retailers, uses Stripe to let customers pay with credit cards, but was looking for a way to offer trade credit. It integrated with Fundbox Pay to offer customers credit terms.