FundThrough lands millions in funding, eyes U.S. expansion
Toronto-based firm helps customers get outstanding invoices paid in as little as 24 hours David Mirvish says invoice factoring was “critical” to his parents.
A pioneering Canadian startup that advances funds to small businesses awaiting invoice payment has landed financing that will allow it to double its workforce and accelerate a U.S. expansion.
FundThrough this week said it has secured $9 million in equity funding and a new $25-million credit facility.
This equity round was led by David Mirvish, who says invoice factoring as it is known “was critical to my parents when they started the business that ended up being Honest Ed’s.
“They were selling dresses and letting their customers pay over time — otherwise the customers wouldn’t have been able to buy them. By factoring those receivables, they had the money that enabled them to buy more inventory to sell and that allowed them to grow their business.”
Many small businesses face the prospects of early failure for the lack of short-term funding while invoices remain unpaid, with Steven Uster, FundThrough’s co-founder and CEO, noting that large customers of smaller businesses are taking longer to settle.
The company, with about 27 employees, says it is filling a niche by helping growing businesses that sell to larger, established customers reduce the invoice-to-payment gap.
Invoices are technically bought by FundThrough, which advances funds directly into the client’s bank account. The client’s customer in turn pays the original invoice when it’s due, and the FundThrough client receives the remaining balance minus fees.
At the same time, enterprises that need to bridge the gap have few options other than personal lines of credit.
Steven Jiang, owner of Markham-based import, export and warehousing specialist ImSent, said FundThrough “was able to help when my bank couldn’t because they looked at the credit of my customers, not my business. I’ve been able to increase my inventory, maintain service levels and not worry about cash flow.”
Uster said the new equity and credit round for FundThrough will lead to a wave of hiring and help advance technology devel- opment while widening financing to a greater volume of businesses. The Toronto-based company has funded more than $150 million in invoices from U.S. and Canadian business clients across a range of industries since its launch in 2014.
FundThrough also plans to double down on its expansion in the U.S., a huge market for alternative lending where the factoring concept is more established than in Canada.
FundThrough, which has seen rapid revenue growth over the past year, enables customers using its digital platform’s invoice-backed credit line to have their outstanding invoices paid in as little as 24 hours, with a 0.5-per-cent fee charged on top of the amount.
Small businesses create an account on the firm’s website and connect their invoice accounting app to FundThrough, which reviews the account for creditworthiness and establishes an initial limit that can increase over time. Customers can receive payment for any number of invoices up to the approved limit using the platform on desktop and mobile.
Uster said funding approval is based in part on the credit strength of the small businesses larger customer, with FundThrough using data obtained with permission of the client to arrive at a funding limit and with funding amounts exceeding invoice totals to allow for non payment of the receivable.
Uster said his firm may look at factors including social media history to authenticate applicant-provided data and to allow a broader base to determine loan eligibility. “There are a lot of things that can make you creditworthy that you might not even know of.”