Due to the high demand for short-term financing by small businesses, the invoice financing market has become saturated. But two companies have emerged as market leaders, offering fast service and reasonable terms for cash-strapped businesses – BlueVine and Fundbox.
While both companies offer invoice financing, they serve different target customers and operate under different fee structures. Understanding the differences could be the key to determining which company may have the best small business loans for your situation.
The economy is growing again and that should be good news for small businesses. However, where there is business growth there are growing pains, which include periodic cash shortages. It takes money to make money, which can be a challenge for smaller businesses that want to get into the game. It can be especially challenging for businesses that rely on the timely payment of receivables to keep their cash flowing.
Without it they can’t ramp up for new customers or larger orders which can keep them on the sidelines. However, in recent years, a new source of small business financing has emerged offering the ideal solution for businesses that need quick access to cash – invoice financing.
Bluevine vs. Fundbox
|Rates (APR)||$5,000 – $5M||$1,000 – $100,000|
|Loan Amounts||15% – 78%||10% – 80%|
|Term Lengths||12 weeks||12 or 24 weeks|
|Minimum Annual Revenue||$60,000||$25,000|
Invoice financing is a form of asset-based lending that uses a business’s invoices as a form of collateral for extending short-term financing. It involves a straightforward transaction in which a business sells its invoices to an invoice factor company in exchange for cash.
The factor company will pay the business between 80 and 90 percent of the value of the invoice, holding some back in reserve to disburse to the business when the invoice is paid, and also deduct its fees. The factor company relies on the creditworthiness and financial stability of the business’s customers for approving the loan, which makes it easier for small businesses to qualify.
BlueVine is an online-only lender that specializes in invoice financing for small businesses. Its form of business is more of a traditional invoice factor that advances a percentage of an invoice it purchases from a business and holds a reserve until the invoice is paid. The fee is deducted from the disbursement of the reserve portion.
BlueVine will advance 85 to 90 percent of the invoice value, keeping 10 to 15 percent in reserve. When the end customer pays the invoice, the reserve is disbursed less the fee, which accrues at a rate of 1 to 4 percent per week. The maximum loan term is 12 weeks.
To qualify for invoice financing with BlueVine you need to have a minimum credit score of 530. The higher your score the better the terms you can receive, including a lower fee and a higher loan amount. You will also need to show a minimum of $60,000 in annual revenue for a loan and $100,000 in annual revenue for a line of credit. You will also need to show at least a three month operating history. BlueVine offers loan amounts between $20,000 and $2.5 million.
The application process for BlueVine is quick and easy. Along with your Social Security number, you will need to provide some information about your business, including revenue amounts. It will also ask you about your invoicing system for the possibility of integrating it with BlueVine’s system.
If you don’t use an invoice system, such as QuickBooks or Xero that integrates with BlueVine, you can use BlueVine’s invoicing system instead. Once approved, you can receive funding via ACH in as little as 24 hours.
Why Choose BlueVine
You would want to choose BlueVine is your financing requirements exceed $100,000. Generally, if your business generates larger or more frequent invoices, you might need access to more capital. Typical BlueVine customers are manufacturers, wholesalers, tech and software, professional service, subcontractors, and trucking. BlueVine does not issue loans to businesses in the medical or health care fields.
You would also choose BlueVine if you don’t use an invoicing system compatible with Fundbox or you prefer not to integrate your system. You would, however, be required to create your invoices from BlueVine’s invoicing system.
Fundbox operates a little differently than BlueVine – more along the lines of a traditional lender. Instead of advancing a percentage of the invoice and accepting repayment of the loan upon repayment of the invoice, Fundbox advances 100 percent of the invoice and repayment is made through weekly payments over 12 or 24 weeks.
For a 12-week loan, the weekly payment is 1/12th of the loan amount plus 1/12thof the fee, which is established at the outset. Fundbox fees are based on the financial strength of your business and the amount of the invoice. The average fee for a 12-week repayment term is 7 percent, and 15.7 percent for a 24-week term. Fundbox allows you to pay down the loan early, which can reduce the amount of fees paid on the loan. It offers loan amounts between $1,000 and $100,000.
There is no minimum credit score or business revenue requirement with Fundbox. However, if you seek a line of credit from Fundbox, you will need to show at least $25,000 in annual revenue. The only qualification is that your invoicing system be able to integrate with theirs. That means you must use one of the following invoicing systems:
- Sage One
You will need at least six months of operating with one of the invoicing systems to be considered for a loan.
To apply with Fundbox, you need only provide your name, email, phone number, and access to your invoicing system. Fundbox evaluates your invoice history to determine your ability to repay the loan. Once approved, funding can occur in as little as 24 hours.
Why Choose Fundbox
If your financing needs don’t exceed $100,000 and/or you have less than fair credit, your needs would be better served with Fundbox. Generally, Fundbox customers are smaller businesses that don’t generate large or frequent invoices. They tend to be B2C type businesses, whereas BlueVine’s caters primarily to B2B businesses.
As far as fees go, the two companies are not that far apart. However, because of the way Fundbox’s repayment works, you could end up paying a higher APR over the repayment period. The total cost of a $10,000 advance over three weeks with Fundbox would be in the range of $130 to $200. Over a nine-week period, you would pay between $520 and $820 with Fundbox as compared to $360 and $900 with BlueVine. With both companies, your fees could decrease with frequent usage.
BlueVine vs. Fundbox: Final Thoughts
Both companies have earned a very good reputation for customer service and technical support. A check on the review sites shows both companies getting good marks for their support teams. Both also provide very good online resources in the form of FAQs that address most issues that could come up.
Positive reviews outnumber negative reviews by a big margin for both companies. The negative reviews tend to be from disgruntled customers who couldn’t get a big enough loan or complained about high loan fees. Both have an A+ rating from the Better Business Bureau.
You don’t use invoice financing because it’s cheap – it’s not. You use it for the speed and ease with which your business can gain access to capital. If your business is growing, it can be an ideal solution. Both BlueVine and Fundbox offer reasonable terms, quick access to funds, and excellent service for businesses on the move.