Small Business Trends spoke with Prashant Fuloria, CPO at Fundbox, about the new product. A company press release states there are 18 million U.S. small and medium sized businesses underserved by existing funding options. These businesses rely on personal credit, often the credit of the business owner. The AI developed by Fundbox feeds the company’s Small Business Graph, a collection of data used to calculate credit worthiness.
Circumventing Personal Credit
“This is a big deal,” Fuloria said. The new product not only circumvents personal credit, it bypasses the accounting software which had been necessary before to get one of these loans.
“Any other financial institution that extends credit to a small business relies in some way, shape or form on personal credit.”
Personal credit scores like FICO are often good benchmarks for how you handle credit as a consumer. However they aren’t always the best way to judge a businesses’ health. Besides, many business owners prefer to keep the two separate or have already leveraged personal credit for non business uses. According to Fuloria, there’s quite often a disconnect between the two.
Fundbox Direct Draw Means No FICO Score Needed
“Their FICO scores can be less than stellar while their business is actually very robust,” he says.
Fundbox clients using Direct Draw only need their business bank account to get started. Company algorithms look at the numbers there to make a decision. In Fundbox’s case, multiple data sources are used to collect information which in turn goes into the Small Business Graph.
These latest innovations allow Fundbox to reach a much wider swath of small businesses looking for credit. A press release from the firm states they currently work with over 50,000 small businesses but can see the activities of 12.8 million on the Small Business Graph.
Underwriting Replaced by Data at Fundbox
“We don’t have a traditional underwriting team,” Fuloria says. “There are no traditional underwriters at Fundbox.”
In their place, the company has the combination of data scientists and credit analysts. These analysts look at the credit models the company has put together and how well it is performing. They then go back to the data scientists to tweak their machine learning (AI) models.
No Business is an Island
“We look at each business in the context of the work they operate in,” Fuloria says.
For example, Fundbox would look at how a construction company invoices all its clients and at its interactions with vendors and suppliers. It’s a macro approach highlighting trends in important areas like frequency of payments. Financial transactions with associates like accountants and suppliers also play a big role.
The result is a proprietary data asset.
“In the same way the Facebook graph connects you and your friends, the Fundbox Small Business Graph reflects an understanding of our customers and how they work with the businesses around them,” he says.
What Is Fundbox?
Fundbox was founded in San Francisco in 2013. The technology company uses predictive modeling, big data analytics and engineering to offer small businesses financial advances to solve cash flow issues.
The company’s website says small businesses can get money as quickly as the next business day. A charge of 4.6 percent is divided over a 12 week period. But businesses can repay these advances over a 12- or 24-week period through a series of auto debits and the remainder of the charges are waived.