Growing up, I learned firsthand how a small-business owner struggles with cash flow. My dad owned a physical therapy clinic with six employees on the Upper East Side of New York. It was a successful business, but he often wrestled with a problem: Waiting weeks, sometimes months, to get paid for his services.
His clinic typically received payments through third parties, mostly health insurance companies. All it took was for one billing to go wrong or get delayed for his finances to suffer. He wouldn’t get paid for a month or longer. He’d end up being strapped for cash and be forced to rely on credit cards. “Billing delays were just killing me,” my father told me once.
Updating ancient techniques.
I remembered my dad when I began my own career as an entrepreneur. In 2013, I started a company called BlueVine. A fintech startup, it offers financing that certainly would have helped my dad plug the cash flow gaps that often plagued his business.
BlueVine specializes in a business funding solution that’s been in use for 4,000 years. It’s called invoice factoring, which allows a business owner to tap into capital trapped in unpaid invoices. A financing or factoring company would advance a business owner a big portion of an unpaid invoice. The financing company would get the funds back plus fees when the invoice was paid by the business owner’s customer.
Merchants have been using this system since the Babylonian Age. A traditional, paper-based form of factoring is still widely-used in the United States. Through technology, however, factoring has become a faster, more reliable and more convenient way of funding a business.
“Would you use this product?” I asked my father when I was starting BlueVine.
“Yeah,” he said. “I wish I’d known about this.”
In fact, my father would have encountered a different type of factoring in the 1980’s and ’90’s during the heyday of his career as a business owner. Then factoring was slow, clunky and burdensome for most business owners, who were typically required to turn over all their invoices to a financing company. To a large extent, factoring still operates in its traditional form.
Technology changes everything.
It’s been three years since BlueVine unveiled a web-based factoring platform powered by world-class risk and data science technology. That platform has transformed factoring into a fast, convenient and flexible form of online financing; one that offers business owners control over their invoices.
I started BlueVine because I saw an enormous market opportunity that would also dramatically make it easier for small businesses to access financing. During my years in venture capital, I saw the promise of fintech. I became impressed with the many ways technology…