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These days, a ton of people are earning some or all of their income through the “sharing economy” – opting for self-employment instead of the conventional 9-to-5 grind. Uber drivers, Airbnb operators, and online business owners can certainly have a lot more freedom and control over their day-to-day work life, but those benefits come with a price: financial stability.
Like many of us working “regular” jobs, self-employed people working in the sharing economy find themselves living paycheck to paycheck, making it harder to deal with unexpected repairs or other unforeseen events – let alone set aside funds to re-invest and grow their businesses.
That’s where Clearbanc comes in: a Toronto-based FinTech company that offers a new way for entrepreneurs in the sharing economy to access financing.
Founded by Andrew D’Souza, Michele Romanow, and Charlie Feng back in 2015, Clearbanc makes fast, no-interest financing possible for entrepreneurs running small businesses over the internet. In as little as one or two days, users can get their hands on enough capital to help cover unanticipated expenses or help them grow their businesses.
A better way to fund your business
- Get up to $1M monthly
- Pay back as you grow
- One flat fee, no interest
A Financing Platform Built With the Sharing Economy in Mind
In the old days, quick financing would typically come alongside a massive interest rate – often from a predatory payday lending company. With such high rates, those loans certainly aren’t the most cost-effective way to grow a small business. As for getting small business loans from a traditional lender, like a brick-and-mortar bank, those entail a lengthy application process. Not only does your rate depend on your credit history, the new loan affects your future credit score.
Clearbanc came up with a new way of lending to self-employed people, with a revolutionary method of evaluating an entrepreneur’s eligibility for a merchant advance. That’s right – an advance, not a loan (which entails interest).
In order to apply for an advance, users simply provide Clearbanc with data from their small business – by linking their account (with Uber or Airbnb, for example) to their application and sharing their business’ history.
Clearbanc’s proprietary revenue forecast engine analyzes thousands of data points (from at least the past six months), like the merchant’s past reviews and earnings as a host or driver, to evaluate the financial health of the applicant’s business. They don’t run a credit check on any applicants – they just use their own screening process.
It only takes about a day to get an offer from Clearbanc for an advance, which comes alongside a flat, fixed fee instead of charging any sort of interest. You can also forget about late fees, origination fees, or penalty fees – no surprises.
Clearbanc doesn’t get paid back until your business gets paid: when you complete a ride, or receive a guest at your listing, Clearbanc gets a percentage of the earnings until the advance is paid back in full.
Because users see the fee upfront, and can choose the terms of their repayment plan, Clearbanc offers a uniquely transparent and, arguably, more fair way of getting an advance for your small business.
Clearbanc offers merchant advances for freelancers working on a number of shared economy platforms. In October 2015, Uber became Clearbanc’s first partner – with many more to follow thereafter.
Uber pays its drivers weekly, and the deposit can take one or two business days. But this schedule can sometimes be too infrequent, especially when you’re budgeting on a freelance income. What happens if you need to pay for an unexpected repair or have a sudden family emergency?
For Uber drivers, Clearbanc offers two financing options:
This is part of Clearbanc’s partnership with Uber, allowing drivers (after Clearbanc’s screening process is completed) to have access to as much as $1,000 in financing.
- Of that total amount, up to 25% can be made available to the driver right away.
- No interest, but a fee of $50.00 is charged to the driver if they don’t pay the amount in full after 15 weeks.
- Clearbanc is paid back once per week with a predetermined and fixed percentage of the driver’s earnings – which the driver decides before they finalize the advance.
This option is not part of the Uber partnership, but Uber drivers can use this financing via Clearbanc – which allows drivers to get a cash advance of their earnings loaded onto a debit card.
- The fee for each deposit (which can be done daily) is $2.00.
- Doesn’t have to be used every day, and drivers only pay on the days they cash out – so Instant Pay can be used as much or as little as the driver wants.
Unlike with Uber, people who rent out a place on Airbnb can raise their prices if they upgrade their listing with new furniture, decorations or renovations – maybe even invest in a completely new listing. Clearbanc offers advances to Airbnb operators for exactly this reason, and it claims that 83% of its customers end up boosting their earnings.
For Airbnb operators, Clearbanc offers:
- Up to $100,000 in flexible capital to upgrade or invest in a new listing
- The application and offer can be made within just one day
- User can choose how much money they want, and how to spend it
- Entrepreneurs pay the principal back, as well as the flat, fixed fee, as they earn payouts from their Airbnb customers.
Financing for Small Business Owners on Several Other Platforms
Clearbanc doesn’t stop at Uber and Airbnb – the company has linked up with several platforms that enable entrepreneurs to earn money online. Small business owners that have a listing on HomeAway, advertise on Facebook, enable online payments with Stripe, receive electronic invoices using Joist, or have an e-commerce operation on Spotify can all apply for a Clearbanc advance with the same terms. The same goes for PayPal, KickStarter, and Braintree.
Users simply need to connect their accounts and wait for an offer – then decide how much of an advance they’d like and their scheduled repayment percentage.
What About the Risks?
When you get a merchant advance from Clearbanc, you are essentially signing up to work for whichever sharing economy platform you use to apply. That can be a big commitment, depending on how much financing is provided – but merchants can pay back the advance at any time in full without needing to earn the repayments.
Clearbanc claims that they don’t spring any surprise fees on their customers, and promise a fixed, flat fee that merchants see before they agree to anything. Compared to payday lenders and brick-and-mortar banks, the transparency and risk bring a lot more flexibility to small business owners in the sharing economy.
Author: Jeff Gitlen