The P2P lending industry proved to the world that alternative financing models could work. In China, P2P lending grew from $30 million in 2009 to $7.8 Billion today. But it’s not the industry’s explosive growth that is truly revolutionary. The truth is, it’s the concept of peer to peer lending that changes the game. Something experimental was proven. In today’s modern economy, B2B lending companies are able to apply these strategies to offer unique financing options that can change the way you do business. In the business environment, a dollar can go much further. This means that B2B lending could very way change the economic landscape.
The main advantage with B2B lending is flexibility. Businesses can pick a term, maturity date, and prepayment requirements. You’re able to shop around and compare your options against the market rate, providing more value than the banks. For loans under $500,000, large financial institutions don’t want to deal with creating flexible payment terms. Instead, they’d prefer to sell their financial services as a product. With B2B, you’re able to build a financial service that works for you.
The question is, which B2B lender is right for your business? We’ve compiled a list of the 7 best lenders. We’ll compare the differences between them, and help you find the one that’s right for you.
With the objective of shortening the time frame between invoice and payment, C2FO aims to improve the efficiency of supplier and buyer relationships. Their business model is appealing to both suppliers and investment companies, improving returns for both by cutting out the middleman.
Here’s how it works. Companies issue invoices for the goods they supply, or the services they render. They then incur significant expense completing their contractual obligations, leading to challenges managing working capital. It’s common practice for companies to sell their invoices to banks. However, because banks consider this a high-risk investment, this cuts into supplier profits. C2FO looks at your business history to determine your specific level of risk. A company who regularly has their invoices paid in full and on top is a low-risk investment. They are then able to offer you a rate much lower than traditional lending services.
Their service is also appealing for business who invest in outstanding invoices. This platform allows them to hand-select companies whose payment terms work with their needs, improving their revenue. The end result is a dynamic marketplace that offers businesses competitive rates compared to traditional institutions and offers financing for companies that would traditionally be unable to secure financing.
If you’re looking to spread large up-front expenses across a longer period of time, a traditional loan is the best option. For many businesses, this process is straightforward. You walk into a bank, fill out a form, and the bank quotes you a rate. For lenders, offering a fixed set of terms is very attractive. But for borrowers, it’s important to know what your options are.
Instead of applying to each lender directly, you can apply through Fundera. Their system puts your loan on the market, and accepts bids from lenders. The end result is a list you can choose from, giving you the flexibility to pick terms that work for you. For those of you who like to shop around for the best deal, this is the simplest way to do it.
For any small or medium sized business, a line of credit is the lifeline your company needs. Best used for managing variable expenses, this type of financing is best used for preemptively getting access to capital that you may not yet need.
Like a standard business loan, you select how much you would like to borrow and fill out a simple online form. Once approved, you can access to as little or as much of the principal as you like. The advantage of a line of credit is that you do not pay interest on what you haven’t used. The loan principal is more like a limit. Each month, you’re only required to pay the interest you have incurred. The borrowed amount is paid back on your schedule, offering a loan that works for your business.
Kabbage is able to offer loans to businesses that can’t qualify through traditional lenders, and offer reduced rates to financially stable companies. They review thousands of data points across your business to create a fair risk assessment and have attracted financing from lenders who want to reduce their risk.
Taking inspiration from Silicon Valley’s startup culture, Funding Circle was started to give new companies around the world to initial capital. Their platform bridges the gap between venture capital firms and small lenders. Instead of connecting you with existing or crowdfunded finance, they’re partnered with several venture capital firms to repackage their investments in a more traditional form.
Although these loans follow a traditional payment schedule, the one advantage they have over other lenders is that they do not charge you a fee to prepay at any time. When you have extra cash, you can cut your interest expense by paying the loan off early.
Because they work with lenders who are familiar with new businesses, their rates are typically lower than you will find elsewhere.
Although we’ve already touched on one company that helps you borrow across your invoices, this business model isn’t suitable for everyone. That service might be used for single, high-value invoices, but it isn’t a viable option when you’ve got hundreds of smaller invoices.
Their MarketInvoice Pro service allows you to instantly liquidate every invoice your company issues. They offer loans of up to £4 million, fluctuating with your daily business operations. Their platform is able to integrate with most common accounting platforms and dynamically adjust your credit limit based on how many outstanding invoices you have.
One of the main advantages of this system is that your loan behaves like a line of credit, rather than a traditional invoice discounting service. You can borrow as much money as you need up to the total amount of outstanding invoices you have, and only pay interest on the amount actually borrowed. Because this is a secured loan, interest rates are lower than a typical line of credit. This unique financial product is unlike anything offered by brick and mortar institutions, clearly demonstrating how modern lending practices are changing.
On paper, Street Shares seems like your average lender. They offer term loans and lines of credit up to $100,000, as well as contract financing up to $500,000. But they’ve partnered with lenders enabling them to offer better rates to socially conscious businesses.
For many investors, financial performance is the metric used to determine everything. Recently, there’s been an increase in so-called Social Funds. These are investments that are selected not only for their financial profit but their social profit as well. Environmentally friendly projects, job creation, and improvements to the availability of low-income housing are all examples of social profits. Applicants are asked to share their story as part of the process, helping you to appeal to lenders to want to know what they’re supporting.
Since so many social returns come at the expense of financial returns, many business owners are choosing to give up potential revenue to support a cause they believe in. To some lenders, this makes you less appealing. But to Street Shares, you’re able to connect with investors who share your vision.
Businesses with an immediate need for short-term capital will certainly be interested in BlueVine. They offer loans through two common methods: both invoice financing or an unsecured line of credit. Loans are approved in as little as 24 hours, with no paperwork necessary.
Borrowers can access as little as $5000, or as much as $2 million. Interest is calculated weekly, starting at 0.4% and scaling up to 1%. They use a variable interest rate that changes over time, depending primarily on your payment history and the size of the loan. Over the long term, they’re not necessarily the best option. But for terms under three months, their rates cannot be beaten.
If you’re used to dealing with a specific financial institution for a long period of time, suddenly having all of these choices available can be a little overwhelming. Fortunately, selecting one is easy. Your decision depends on what resources you have, and what you need the money for.
If you’re looking to raise capital to provide goods or services to your clients, you have two options. C2FO provides the best way to turn individual invoices to cash so you can cover your expenses. For companies with many outstanding invoices, Market Invoice Pro can offer you a line of credit secured by the value of your outstanding collections.
For new businesses, you’re likely going to want to borrow a large amount of startup capital to lay down the foundation of your business. Funding Circle offers term loans targeted towards new ventures, using a more traditional risk model. For socially conscious businesses, Street Shares allows you to share your vision with investors, providing loans to companies that want to make a positive change in the world.
For established businesses, your best option is to go with a lender who can leverage your track record of success into a better rate. Bluevine is the best option for short-term financial needs, while Fundera offers term loans with a longer repayment schedule. For variable expenses, a line of credit from Kabbage allows you to get approved for an amount, and borrow up to that amount on an as-need basis.