FAQ


P2Binvestor (P2Bi) is a working capital provider that offers crowdsourced, asset-secured lines of credit (LOCs) to growing companies with big ambitions. P2Bi’s revolving lines of credit are secured by accounts receivable (A/R) (and in some cases inventory) and range in size from $250K to $10M.
Receivables financing (commonly called factoring) is a type of funding vehicle in which a business sells its invoices (typically referred to as accounts receivable) to a third party at a discount in exchange for cash. The business’ payors send payment directly to the third party (in this case P2Binvestor).

With purchase order financing (P.O. financing), capital is extended from a third party directly to a supplier, with payment later upon delivery from the end user. Funds go to the supplier to fill the order rather than to the business to use for other purposes.

Inventory financing functions similarly to A/R financing except finished goods are used as collateral instead of invoices in exchange for working capital.

P2Binvestor focuses primarily on receivables financing, although we can consider finished inventory in some cases. We also work with a community of partners to offer additional financing options (such as P.O. financing).

Ex-Factor is what we call our suite of revolving LOC products. Our products operate similarly to traditional A/R financing vehicles but include unique benefits that separate us from the competition. Ex-Factor is easier to use, technology enabled, and designed for transparency—so you always know exactly what you’re paying.
Unlike standard industry borrowing vehicles, Ex-Factor was built by entrepreneurs, for entrepreneurs. It’s designed to help your business improve its financial health, increase profits and grow. Here are some of the features that make Ex-Factor stand out from the rest:

  • Access to capital for growth: We’re ready when you are. We combine crowdfunding and our proprietary technology platform to get you the cash when you need it. Get up to $10M in financing in as few as 15 business days. We can also accommodate line increases quickly for a 1.5% fee.
  • Transparency: Unlike many of the others, we’re upfront with our fee structure. There is no misleading fine print or other “trickery” that works to push effective rates above what is advertised. We charge a daily, non-compounding rate only on what you use.
  • Rate decreases over time: In general, discount rates reflect risk and risk can change. As your business gets more profitable, gets bigger orders and expands into larger markets we will review your discount rate and consider reductions as appropriate.
  • Financial partnership: Your success is our success. Between our Operations Team with their experience across a broad range of industries, and our proprietary online dashboard (Lending Hub), we provide our clients with the real-time data, financial support, and insight that helps get them to the next level.
Our business model is designed to support new and growing businesses better than other financing solutions. We are significantly more flexible on LOC amounts, turnaround times and line increases. Our crowdsourced capital pool allows us to deploy funds rapidly to our clients and our fee structure is simpler and more transparent than the industry standard. We are positioned to assist in your growth, not hamper it!

While bank term loans or lines of credit (LOCs) can offer lower rates, they can be difficult to get due to federal regulation, internal controls and a traditionally risk-averse credit posture, especially when it comes to working with new businesses. Banks typically impose restrictions on how you spend loan proceeds, and often charge additional fees; beyond the basic interest rate there can be annual fees, line fees (for LOCs) and others. By nature, banks are also much slower to approve and fund by weeks or even months, and/or increase, an LOC—which means your business can’t scale as quickly.

Want to learn more about term loans vs. lines of credit? Take a look at our ebook.

Our products are perfect for companies facing a variety of challenges. With our line of credit you can:

  • Make your cash flow smoother and more predictable.
  • Increase your ability to fill new and future orders.
  • Avoid being limited by slow-paying customers.
  • Use the capital as you need to grow your business, free from the use-of-funds restrictions imposed by many banks and other lenders.

For example:

Company X—a granola company—must pay upfront for materials, production, and shipment to stock shelves at Whole Foods. While Company X waits to get paid, a big order comes in from Safeway. Without payment from the first order, Company X doesn’t have the funds to cover the upfront costs of the new order and will risk losing the opportunity to work with Safeway and grow its business.

Company Y—a staffing company—is responsible for paying its employees on behalf of its clients ahead of receiving payment itself. Company Y typically floats payroll anywhere from five to 30 days and needs operating cash to keep the business running while it waits for payment.

You can also watch this 90-second overview to learn how businesses use our line of credit.

From the time you submit your initial application, you can be funded in as little as two weeks. Required steps are outlined below:

1. Qualification: This starts with you. Just contact us online via our Get Started form. You can also call us at 720-361-1500. We will work with you to better understand your business needs and determine if you are eligible for our LOC products.

2. Application: If you qualify, your next step will be to provide the following documentation (listed below) so that we can explore what lending options work best for you. P2Bi will then issue you a Term Sheet.

  • Balance sheet, as of the end of the last closed month.
  • Balance sheet, as of the end of 2016.
  • Income statement (P&L), current YTD (through end of the last closed month).
  • Income statement (P&L), full year 2015.
  • Income statement (P&L), full year 2016.
  • Accounts receivable aging report, current YTD (through the end of the last closed month).
  • Accounts payable aging report, current YTD (through the end of the last closed month).

3. Term Sheet. The term sheet is non-binding and outlines the terms of the facility, including effective rate and preliminary line amount based on current A/R balance, revenues, strength of payors and a few other factors. By signing the term sheet, you authorize P2Bi to begin an underwriting review in anticipation of completing a final comprehensive borrowing agreement.

4. Underwriting. The credit underwriting process takes about five to ten days and once completed successfully, means you’ve made it!

5. Onboarding. The final, but important step. We provide a one-hour tutorial of the Lending Hub and an introduction to the Client Success Team. These are the folks that will be working with you to manage incoming payments and your outgoing capital. They want to see you succeed as much as you do!

To qualify, your company generally must meet the following criteria:

  • Your company must have a minimum of $250K outstanding between A/R and inventory.
  • Your company must be US-based with US or Canada-based payors.
  • Your company can NOT be a sole proprietorship.
  • Your company has approximately $1M in revenue and is growing.
  • Your customers are all or mostly Business to Business.
We provide some of our own capital to fund advances. Most of our facilities are funded by our crowd of investors, which as of early 2017 includes about ten institutional investors (hedge funds and family investment offices) and 120 accredited investors. When you secure an a LOC with P2Bi, your line amount is guaranteed, and we use a combination of these capital sources to fund it.

With our proprietary technology platform, our investors can advance and withdraw funds on a day-to-day basis. This gives P2Bi significant advantages in lending flexibility and speed over banks and other capital providers.

Importantly, when clients perform well, investors take notice and are more likely to support further progress through additional investment.

For example:

Company Z has a line set up for $500K to fund the production of its nutrition bars. Recently the company learned that Whole Foods wants to increase its shelf space, which will require boosting production capacity quickly.

With an additional Whole Foods invoice for $250K, Company Z requests a increase in line capital. Our Operations Team approves the increase, which is then reviewed and approved by our Credit Committee, and ultimately results in the expanded line becoming available quickly after Company Z’s request.

The Lending Hub, our proprietary funding platform, is the go-to online dashboard for our clients. From Lending Hub, companies can make funding requests, see incoming payments, follow the history of funds drawn and discount charged, etc.

Behind the scenes, we use a third-party lockbox account to collect paid invoices. Our Operations Team processes and reports on invoices as they come in, and can update a company’s available line balance within a business day or two of invoice submission.

Your credit line is largely determined by the value of assets available to secure the line (primarily A/R and in some cases inventory). Other factors can also be considered, such as the amount you request, years in business and growth trajectory.
Yes. Your LOC is secured by A/R, and in some cases finished inventory is also included. Unlike other factoring, firms which advance funds on a per invoice basis, we determine your borrowing capacity based on eligible current assets (A/R or inventory). This is your borrowing base and is a dynamic number that may fluctuate as often as daily.

In most cases, you can draw up to 70-80% of the full value of your A/R and between 25-50% of the value of your inventory. This percentage depends on criteria such as the strength of your paying customers and whether your business is profitable. Specific terms will be reflected in your contract but can also be reviewed to make changes if and when appropriate.

This 70-80% limit is a cushion that helps us manage our lending risk and helps you manage your borrowing risk. Every business has invoices that will be paid late, will be disputed or not paid at all. A slightly lower borrowing limit protects both parties against invoices that don’t pay 100 cents on the dollar.
Yes, some collateral is excluded. We cannot consider:

  • Medical insurance receivables due to insurance billing (medical device or service provider companies are okay, however).
  • Perishable, unpackaged food such as fresh fruit.
    Receivables from within the trucking industry (although logistics companies are okay).
  • Construction where subcontractors and/or retainage billing is used.
  • Consumer-facing receivables.
Yes, we do require that any equity owner with 20%+ stake in the business sign a personal guaranty. If there are no significant owner/operators, we require the CEO to sign a validity/good actor guaranty. Any additional personal guarantees provided can help us offer more advantageous terms.
Unlike other factoring firms that charge on the value of each invoice purchased, we charge only on the dollar amount you draw from your line.

Specific costs for an Ex-Factor LOC include:

  • A one-time origination fee (equal to 1.5% of your maximum credit line) that covers due diligence, underwriting and onboarding costs.
  • A daily discount cost on outstanding principal.

That’s it.

Average annual discount rates range from about 13-19%, depending on the client and line amount. Discount is charged daily on a non-compounded basis only on the borrowed amount outstanding at the end of the work day.

For example:

On January 1, Company X borrows $100,000 of a $250,000 LOC at a daily discount rate of .0493%. Discount for January 1 is calculated as: $100,000 (principal borrowed) x .000493 x 1 day = $49.30.

When an invoice payment comes in, we apply funds to the discount first, then outstanding principal. If a payor’s remitted funds exceed the value of your discount and outstanding principal, the remaining capital will be forwarded directly to your bank account.

For example:

On Day 1, Company X borrows $100,000 of a $250,000 LOC at a daily discount rate of .0493%. Discount for Day 1 is calculated as: $100,000 (principal borrowed) x .000493 x 1 day = $49.30.

At the end of Day 1, $100,000 (principal) + $49.30 (discount) = $100,049.30 outstanding.

With $100,000 outstanding, if eligible collateral becomes available to the credit limit of $250,000, an additional $150,000 can be accessed.

On Day 2, $35,000 in paid invoices comes in. These funds are first applied to the $49.30 in outstanding discount. The remaining $34,950.70 (or $35,000 – $49.30) is applied to outstanding principal of $100,000. This leaves $65,049.30 (or $100,000 – $34,950.70) in outstanding principal.

Discount on Day 2 is calculated as $65,049.30 (principal) x .000493 (daily discount) x 1 day = $32.07.

At the end of Day 2, $65,049.30 (principal) + $32.07 (discount) = $65,081.37 outstanding.

As mentioned previously, additional line capacity opens up as eligible collateral becomes available.

P2Binvestor isn’t like other lenders. We combine deep understanding of early stage growth management issues, a syndicated risk model and a proprietary technology platform to provide scalable capital in real time that uniquely supports growing companies.

We saw an opportunity to disrupt the finance industry and replace dated, inconvenient ways of borrowing money with something much more simple, transparent and user-friendly.

No one else offers a product made by entrepreneurs, for entrepreneurs that not only provides business owners with the working capital they need, but it also provides them with financial insights they need to help their companies grow.

If you found a rate that you believe contains no hidden fees, you still may want to consider that our financing has no covenants, no restrictions on line usage, and as such, is often a much more flexible solution than those offered at lower rates.

In fact, if you’re not sure how to compare other offers, we’re happy to help you sort through other term sheets to help find any hidden fees and clarify your exact cost.

With Ex-Factor, you can spend the capital on whatever you need to keep your business growing—payroll, inventory, bulk ordering, etc. Other lenders often restrict how you can use your funds – we don’t.

If you secure bank financing at a lower rate, we will make every attempt to match it within three days. If we can’t, you can leave your contract without penalty.

Every business has unique financing needs, and we understand that receivables financing might not be the best fit for your business. If you’re better suited for purchase order financing, term loans, or another financing option, we’ll let you know why and we’ll work with our extensive partner network to help you get the right kind of growth capital.
Our competitors come in two broad flavors—banks and alternative lenders:

Banks can offer lower rates, but they can be difficult to secure due to federal regulation, internal controls, restrictive covenants and a traditionally risk-averse credit posture – especially when it comes to working with new companies. Banks tend to be generalists and may not have particularly deep insight into the needs of some types of growing companies.

Examples of banks include JP Morgan Chase, Bank of America and Citibank.

Alternative lenders provide capital to businesses who can’t or chose not to, get a loan from a bank. They include traditional accounts receivable factoring firms and firms that use other sources of collateral for security (real estate, equipment, etc.). When compared to P2Bi, many alternative capital providers offer higher fees, less transparency in pricing and unclear terms. Covenants can be limiting and client support, in terms of financial insight and online data and management, is often lacking. They also don’t have our entrepreneurial focus, which uniquely positions us in the lending market.

Examples of alternative lenders include BlueVine, Charter Capital and OnDeck.

If you have any additional questions, don’t hesitate to reach out! Contact our team of lending specialists at hello@p2bi.com.