Sramana Mitra: Can you walk me through a use case? Let’s say a small business applies to Fundbox for financing. Do you call it financing or do you call it something else?
Eyal Shinar: There are a few gateways to the product. It depends on what you’re solving. I would divide it into two buckets. One bucket would be the B2B sellers or the vendors. They use Fundbox Pay.
There we would go to partners/customers that would be a seller or vendor. It could be a medium-sized business or a Fortune 50. Their business is to sell to other businesses. We allow them to offer terms to their buyers. They can offer the buyer net 30, net 60, or net 90 powered by Fundbox.
We don’t offer any credit to the seller in that case. We’re offering a way to sell more to their customers, and also instant payment. After using Fundbox, they don’t need to chase their customers. They don’t need to wait for the money to arrive.
Sramana Mitra: Double-click down on that for me. Let’s say you have a seller who’s using Fundbox Pay to get paid. Are they still getting paid in this net 30, net 60, net 90 mode, or is something happening in this process that is accelerating the payment? If so, what is happening?
Eyal Shinar: Let’s say you have a business that sells to other businesses, which 75% of the businesses in the world are. You ask your customer to pay through Fundbox Pay. Once the customer purchases something from you, you get paid from Fundbox minus a fee that we keep.
Sramana Mitra: So it’s receivable financing.
Eyal Shinar: Technically, it’s not receivable financing. It’s receivable financing in the same way that Visa is doing receivable financing for a restaurant owner.
Sramana Mitra: I don’t understand the difference between what you’re doing and receivable financing. Can you explain to me?
Eyal Shinar: Receivable financing or factoring is very different from what I just explained. It’s this transaction that has already happened and there’s this portfolio of receivables. You buy that portfolio of receivables from a seller at a discount. Then you go and collect from the buyer.
What we do is, we go to the seller. We allow them to make that transaction happen before it happened just like Visa does in a B2C transaction. Visa is facilitating me purchasing a cup of coffee before it happened. They don’t go and buy the receivable from the coffee seller after it happened.
Sramana Mitra: In terms of a business model, it is basically a credit card or receivable financing business model? You’re getting paid interest?
Eyal Shinar: On a credit card transaction, the seller gets paid instantly minus a fee. That’s what we call interchange fees. The buyer is not paying any interest in the first 20 days or so. They get a grace period. Let’s call that period a payment period.
Let’s say I have once charged that month for a $20 dinner at a restaurant. I have 20 days to pay the $20 back with no interest. If I choose to finance that transaction, after 20 days, I can. In fact, I can finance it for three years. At that point in time, I’m going to start paying interest. That’s very similar to what we’re doing.