By Katie Roof for Techcrunch.com,
Another big bet on fintech, Palo-Alto based BlueVine has raised $40 million to provide credit lines for small businesses. The round is led by Menlo Ventures, with participation from Rakuten, Lightspeed and 83North.
While there are countless startups involved in small business lending, BlueVine does something a little different. Instead of offering loans, BlueVine does what’s called “factoring,” where it pays for customer invoices upfront, so that small businesses do not have to wait for the cash to come in.
Cash flow is one of the biggest challenges facing small businesses, and BlueVine says it is tapping into a market that banks often overlook.
“We are disrupting a very very old industry called invoice factoring,” said Eyal Lifshitz, founder and CEO at BlueVine. “They do million dollar loans all day but when you’re talking about sub $250,000, banks really don’t like that.”
Tyler Sosin from Menlo Ventures said he believes in BlueVine because the startup “is filling a void that the banks don’t have the appetite and the operational leverage to service.” It’s great that “they are able to provide credit for small businesses that wouldn’t normally get it.”
While banks typically take on larger clients for factoring, BlueVine is willing to take a chance on smaller operations, securing credit lines under $250,000. They usually purchase between 85 percent and 90 percent of the invoice values on day one and then pay the rest of it (minus a fee) once the customer pays the invoice.
“We have sophisticated machine learning models which aid in decisions” and help with risk assessment, said Lifshitz. “On a unit economics basis, we are very profitable.”
Founded in 2013, BlueVine has raised $64 million to date.
the article first appeared in Tc.com