The Status Quo Isn't Working
The way small businesses are evaluated for credit hasn't really changed in 50 years. Banks and even most fin tech companies base their decisions on the same information: tax returns, personal guarantees, bank statements, and personal credit. There's nothing wrong with any of these things by themselves. But if that's all they're looking at, we think they're missing out on the details that make each small business unique. At Fundbox we take a different approach because we believe that the status quo leaves a lot of people out.
The Struggle Is Real
6 out of 10 small businesses in the U.S. are financially underserved and struggle to find funds to grow. Banks only approve 24% of the applications they receive from small businesses and often can't lend less than $100,000 profitably. But the average small business is only looking for $20,000-$40,000 in funding. Many banks in the U.S. ask applicants for a lot of information but don’t do very much with it. Most of this information only represents a snapshot-in-time. If their metrics look great at that moment, they might qualify for a loan. If they see a temporary slip in business performance (say a late-paying customer), they might not get a loan. We believe small businesses should be asked for as little information as possible and be viewed by their performance over time, not in one instance.
A New Way of Operating
These challenges facing small businesses are not easy to solve. They require a new way of operating. That's why we built the Fundbox Small Business Graph. The Small Business Graph is the way we organize our data so we can see the network of our customers' relationships with their clients, suppliers, and partners. Think of it as a dynamic map of their business ecosystem. At the core of every small business is its interactions with other businesses. By mapping those relationships, the Small Business Graph gives us much better insight into our customers than most traditional methods. The Small Business Graph is why we can make credit decisions quickly with minimal information from the customer.
Connecting the Dots
When a customer connects to Fundbox, we quickly make a credit decision by looking at their financial transactions within their business network. Like the Facebook graph that provides valuable relationship insights among people and the LinkedIn graph provides insights among professionals, the Small Business Graph maps the interactions among small businesses. The Small Business Graph offers important business insights that enable Fundbox to serve small businesses that no one else can, and deliver fast credit decisions that don't rely on personal credit. Our ability to look at a business in real time, within the context of its network—not a lot of static pieces of information—is a different approach to assessing a business's health than other traditional methods, and it is possible because of the Small Business Graph.
We have a fictitious business called Steve's Construction, a Fundbox customer. Surrounding Steve's, we see some of its customers, suppliers, and partners. With its connection to Fundbox, Steve's and the other businesses he works with are all on the Small Business Graph. Through this deep, dynamic connection with Steve's we can offer it new services or even a credit increase.
Learn As We Grow
As Fundbox continues to add more customers like Steve's Construction, we'll continue to build our understanding of small businesses in the U.S. and around the world. We have over 50,000 connected customers, but because of the Small Business Graph, we have insights into about 12.8 million businesses. We know this because of the 60 million transactions in our system. This large quantity of data allows us to serve our customers quickly and gives us confidence that we're making good decisions.
The Way Forward
Right now, the Small Business Graph helps us build a deep relationship with our customers, serve them quickly, and work with small businesses that no one else can. Over time, it will be able to reduce the transactional friction between small businesses, taking us closer to realizing our mission of simplifying and improving the way that small businesses pay and are paid.