Fundbox Review: Best Factoring Service for Very Small Businesses

Fundbox Review: Best Factoring Service for Very Small Businesses

Credit: Fundbox

Our 2017 research and evaluation of factoring services leads us to again recommend Fundbox as the best factoring service for very small businesses. We chose Fundbox from dozens of factoring companies. To understand how we made our decision, and to see our methodology and a list of factoring services, visit our best picks page.

Fundbox gives very small businesses access to credit, which they may otherwise not be able to obtain. It has fewer minimum requirements than most lenders, and both invoice factoring and lines of credit are available. Fundbox has transparent pricing; before you submit an invoice to be factored or request a draw, it shows you the exact fee so there are no surprises when it’s time to repay the advance. There’s no lengthy contract, monthly minimum or prepayment penalty, so you can repay advances early and Fundbox waives the remaining fees.

Fundbox fees start at 4.66 percent per week of the invoice value, based on a 12-week term, or 8.99 percent per week for a 24-week term. The company advances 100 percent of the invoice value; you repay a prorated portion each week, plus a fee. Minimum requirements include using compatible accounting software for at least six months and billing at least five invoices per month or using a business checking account for at least three months. There are no credit checks; rather, the company connects to your accounting software or business bank account to determine your creditworthiness.

Fundbox’s low barrier to entry makes it a viable financing option for very small businesses, as well as those that are new and lack a lengthy credit history and those that have poor credit. It has only three minimum requirements:

  1. Only businesses can use Fundbox; the service isn’t intended for use by individuals, households or families.
  2. Your business must be based in the U.S.
  3. You must use supported accounting software to create and send invoices (see below) for a minimum of six months, with at least five invoices per month, or have a minimum of three month’s history using a business checking account.

Fundbox doesn’t have any minimum revenue requirements, doesn’t exclude businesses from certain industries, and doesn’t require collateral or personal guarantees. The company also doesn’t consider the business owners’ (or their customers’) personal credit scores. However, per the terms of use on the company’s website, when you set up an account, you consent to background checks for yourself and for your business’s directors and officers.

Despite its minimal requirements, Fundbox advances 100 percent of invoice values, making it a good option for growing businesses that are too small to work with most factoring companies but need a financing solution to keep their cash flow healthy when customers have yet to pay their invoices.

Fundbox has an easy application process. To sign up for an account, all you need is your business email address, business phone number and a secure password. You’re not required to provide financial statements, tax forms, legal documents or other paperwork to set up an account, and you don’t have to speak with anyone at the company to get started.

Once you’ve set up your account, you’ll connect it to your accounting software. Supported programs include the following options:

  • Clio
  • eBillity
  • FreshBooks
  • Harvest
  • InvoiceASAP
  • Jobber
  • Kashoo
  • PayPal
  • QuickBooks
  • Xero
  • Zoho Books

Fundbox uses the data from your accounting software or business bank account to determine the legitimacy of your business, evaluate its health, and calculate whether or not you’ll be able to repay advances. You need at least six months’ worth of accounting data on one of the supported software programs to be eligible to factor invoices through this company.

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To help us evaluate Fundbox, we called the company, posing as small business owners looking for a factoring service. We asked company representatives how their invoice financing service works and how it differs from other factoring services.

After your account is approved and your initial credit limit is set, you can select invoices to be funded. If you submit the invoices before noon, you may receive your funding as early as the next business day.

Fundbox differs from most factoring services in that it advances the full dollar amount of the invoices rather than the industry average of 70 to 90 percent. The minimum advance amount is $1,000, which can be a single invoice or multiple, and the maximum is $30,000; however, once your account is established and you provide the company with more information about your business, it may increase to as much as $100,000. The credit limit is revolving, so as you pay off advances, more credit is available to you.

While most factoring companies require you to instruct your customers to remit invoice payments directly to the factor, Fundbox allows you to continue working directly with your customers and instead automatically withdraws weekly repayments from your business bank account. If you prefer that your customers don’t know you’re working with a factoring company, or don’t want to introduce the confusion of wondering which invoice payments they should send to you and which go to the factor, Fundbox may be a good option for you.

The Fundbox representative we spoke with said repayments are automatically withdrawn from your business bank account via ACH (Automated Clearing House), starting one week after you receive the advance. Repayments include a prorated amount of the advance plus your weekly fee. (See below for more information on fees.)

You should be aware that if you’re unable to repay the advance on time, the late fee is steep, costing three times the weekly fee plus an ACH missed payment reimbursement fee. For this reason, it’s very important to make sure you have enough money in your business bank account to cover the repayment in full.

Fundbox is transparent with its customers about its pricing, which is a critical consideration, no matter what kind of business financing you pursue. When you choose an invoice to factor, the company shows you the total amount you’ll pay for it before you accept the advance.

The representative we spoke with explained that you have 12 or 24 weeks to repay the advance and each week you pay a prorated amount of the principle plus a flat weekly fee. There are no upfront fees – no application, origination, due diligence or maintenance fees.

He said that, on average, for a $1,000 advance you pay $7 per week, though your rates may be higher or lower, depending on the specifics of your business. This is somewhat higher than the $3.88 weekly estimate for this amount provided by the calculator on the pricing page of the company’s website.

If you’re able to repay the advance early, there’s no early repayment penalty, and Fundbox waives the remaining fees for the weeks left on your term.

Although Fundbox doesn’t offer 24/7 customer support, phone support is available during expanded business hours of 8 a.m. to 8 p.m. ET, Monday through Friday. You can also reach Fundbox via email or by messaging the company via its website, and a representative will get back to you within 24 hours.

When we called Fundbox posing as potential customers, we had mixed results. Friday afternoons appear to be a busy time, as our calls went to voicemail after a five-minute wait. However, when we called Monday morning, we reached a representative right away who patiently answered our many questions about how the service works, the rates and the repayment terms.

Fundbox’s website has a FAQs page, a blog and a searchable support center that has dozens of help topics that address a variety of topics, including how to get started with Fundbox, how to use the dashboard, pricing terms, payments, security and how to set up your accounting software.

Although we believe Fundbox to be the best factoring service for very small businesses, there are some drawbacks to consider:

  • It’s more expensive than other lending options as a long-term solution. If you plan on using Fundbox for a short period, and the advance allows you to take advantage of an opportunity that helps you grow your business or save money, it can be a valuable resource. However, if you need a long-term credit solution and have the credit history to qualify for other lending options, a small business loan will have a lower interest rate.
  • Repayment is weekly, rather than per invoice. If your cash flow is tight while you’re waiting for one or two customers to pay large invoices, having funds automatically deducted from your business bank account each week may exacerbate the problem. However, if your income is steady, it may be easier for you to repay the advance in smaller increments over a 12- or 24-week period.
  • Late fees add up quickly. If you don’t have enough money in your business bank account to cover the automatic repayment that Fundbox withdraws from your account each week, you’re charged triple the weekly fee plus an ACH missed payment reimbursement fee.
  • Advances may be too small for some businesses. Fundbox has a minimum advance of $1,000 and a maximum of $30,000 (which may increase to $100,000 for established clients), though this cap may be less, depending on the specifics of your business. These amounts are likely fine for most microbusinesses, particularly those that don’t want to take out huge loans. But if you’re in a business or industry that deals with high-value goods (such as technology or fine jewelry) or provides costly services (such as consulting or medical practices), you may need to find a factoring service with higher funding caps, such as BlueVine or American Receivable. You can also check out our best picks page for a comprehensive list of factoring services.