Businesses require spending money to make money, but finding that cash is often a challenge.
Fundera launched its platform today that connects small businesses with lending alternatives to banks. The startup also revealed backing by $3.4 million in venture capital.
Jared Hecht is one of the cofounders. He helpd start GroupMe, which Skype bought in 2011 for upward of $50 million.
“Every year, nearly half of all small businesses report needing working capital, and over 75 percent of those who apply do not receive the financing they need from their bank,” Hecht said. “Credible businesses are being turned away because of overly tight bank restrictions, and while alternative lending can help them receive capital, the process is inefficient and confusing.”
Financial tech has come a long way over the past couple years. The financial crisis created widespread distrust in big banks. This coupled with advancements in payment technology and the growth of online marketplaces has spawned a number of startups that connect borrowers with lenders, for both personal and business loans.
Fundera doesn’t engage in direct lending itself. Rather, it helps businesses sort through this increasingly crowded and complex world of bank alternatives to figure out which financing option is right for them.
Businesses looking for a loan fill out an application with information about their length of time in business, annual revenue, credit score, and accounts receivable. Fundera’s engine will present a handful of lending options that matches their need and connect them with that lender. It receives a 1 percent to 3 percent origination fee from lenders and has matched over 200 small business owners with lenders during beta-testing.
The company claims it will only work with lenders that have the small businesses’ “best interest at heart.” Fundera’s network of certified lenders include OnDeck, Can Capital, Smartbiz, Funding Circle, and Fundation.
Some of the other well-known players in this space are Kabbage, Zazma, and Dealstruck.
Fundera said it is best suited to businesses that are at least nine months old, including restaurants, auto body shops, spas, salons, dental and medical practices, and retail stores. The company also has plans to provide educational tools and information on alternative lending.
Fundera is based in New York City. Khosla Ventures, First Round Capital, Lerer Ventures, SV Angel, and angel investors Strauss Zelnick, Rob Wiesenthal, David Rosenblatt, and David Tisch participated in this round of funding.