Receivables Exchange Launching Auction Platform for Financing Accounts Receivables

image A new financial market will open Monday where businesses as small as $1.5 million in annual sales can borrow against their receivables with prices set in an auction market.

New Orleans-based The Receivables Exchange opens for trades on Monday (17 Nov) after an 18-month development cycle.

Businesses register with the exchange, a process that entails uploading financial statements and completing an application. The Receivables Exchange conducts due diligence on the potential participant to ensure that it is legitimate.

Businesses must meet the following criteria:

  • Minimum of $1.5 million in annual sales
  • At least 2 years of operating history
  • Registered to do business in the United States

Upon approval, the business can list specific invoices for financing, with a minimum total value of $10,000. Then accredited investors (SEC definition here) bid to provide short-term financing until the receivables are collected. Sellers are encouraged to upload PDF copies of invoices, proof of delivery, and so on to get the best rates. However, many documentation requirements are optional.

Sellers select the terms they are willing to accept and the bidder that beats those terms by the widest margin wins the credit. If no bidder meets the minimum terms, the auction ends without a trade.

Co-founders: Justin A. Brownhill and Nicolas R. Perkin

VC backers: Prism VentureWorks LLC and Fidelity Ventures

In an era of tight credit, it's a welcome addition to the financing tools available for small and mid-sized businesses. Larger businesses typically have more options through commercial paper and other capital markets.

The startup expects banks to be valuable sources of referrals. Although, at this point, there are no referral fees or revenue-sharing options.

So far, The Receivables Exchange has signed up sellers with a total of $2 billion in annual sales. And there's been a lot of interest. Founder Nicolas Perkin says his company has been approached by 20 $1+ billion companies.

But what about the other side of the trade, the lender/investor? The company says it has access to $8 billion deployable capital. Of course, that doesn't mean that the capital will be easily enticed into actual deals.

Starting Monday, we'll see what the buy side thinks. Are they willing to risk their capital in the unproven market? If The Receivables Exchange can drive out fraud and deliver on its promises, we think the answer will be yes.

The Receivables Exchange homepage (11 Nov 2008)


Finovate 2008 Digital Insight

image Next up is Digital Insight, now part of Intuit. Karen Van Kirk, director of small business solutions, will conduct the demo.

Calabasas, CA-based Digital Insight will be demonstrating its Small Business Finance Works online banking platform.

FinanceWorks has all the same functionality of Quicken Online. The small business version has been designed to be simple and easy to use for the small business manager. The accounts receivable function includes integrated email capabilities to send personalized payment reminders on the fly.

The service includes integrated remote deposit-capture capabilities.

Small Business Networks from American Express, Capital One, Advanta, Bank of America, QuickBooks, and HSBC

Earlier this week, Visa launched its Facebook Business Network. While the first to use Facebook, several other major financial institutions have opened small biz networks on the Web in the past six months:

  • image Advanta’s Ideablob launched last September at DEMOfall (previous post here). It’s a unique website with monthly contests awarding $10,000 to the best idea, as voted on by users. It’s an intriguing concept with decent traction, almost 30,000 unique visitors last month according to Compete (see chart below). (Full disclosure: I just realized I’m wearing an Ideablob t-shirt; schwag can still pay off!)
  • image American Express’s OpenForum: As the name suggests, it’s a business forum and resource directory, not unlike Bank of America’s (see below). American Express has added posts from several prominent bloggers such as John Battelle’s Searchblog and Anita Campbell’s Small Biz Trends to keep the site fresh. The site has 5,400 members and monthly traffic of about 11,000 unique visitors, up threefold from a year ago.  
  • image Bank of America’s Small Business Online Community, a general forum and resource directory, launched in October 2007 (see original post here). It’s primarily a forum, with some additional articles on the side. Total membership is just under 15,000.
  • image Capital One’s Slingshot, launched in February, is primarily a business directory. But it does aim for community involvement with user-submitted business reviews and comments on certain topics.
  • image HSBC’s (UK) Business Network: Another forum-and-blog site similar to AmEx’s OpenForum. So far it appears lightly used, with just six blog entries this year and 270 member profiles.
  • image Intuit’s Quickbooks Group: Although not a financial institution, the Quickbooks site is a good example of an active community with more content, including ten blogs, and as much traffic as the others combined (not including BofA which is unknown) with nearly 90,000 unique visitors, almost double the number a year ago.

 Unique website visitors in May 2008 (source: Compete)


Person-to-Business Lending: A Wake-Up Call for Small Business Lenders?

image Talk about turning the tables. Now individuals are lending to businesses. Has the credit crunch gotten to that level?

Small business lending, or the lack thereof, was highlighted in today’s Wall Street Journal in a column by Jane Kim that ran on the front page of the Personal Journal section, Where Either a Borrower or Lender Can Be: Small-Business Owners Turn to Online Networks for Funds as Banks Tighten Credit (here).

The article includes three examples of small business owners, frustrated with the stinginess of bank lending departments, that turned to person-to-person exchanges for loans. Apparently, all three had excellent credit since Mr. Walsh was able to borrow $22,500 at 10.25% and Mr. Kelley $18,500 at 10.97%, both from Prosper. And Mr. Kalempa received $15,000 from LendingClub for 9.6%. You don't get funded for loans of that size unless your credit is good and your story even better.

Small business owners may not have time to shop for credit, but they do network. And given how unique positive borrowing experience are, these P2P success stories will be told and re-told dozens of times. The credit-crunch induced conservatism of the banking community, especially towards growing businesses, could be an HUGE opportunity for the new P2P marketplaces.

It could be the crossing-the-chasm market niche that the loan exchanges need in order to gain traction and profitability as they position themselves for the mainstream consumer marketplace. The credit markets are huge and complicated and it's impossible to predict how this plays out. But if I worked in small business banking product management, I'd circulate this story to senior management and start working on my response to the P2P lending threat. 

Virgin Money P2P Lending on the Cover of Fortune Small Business

Jeff Bezos may have grabbed the cover of Newsweek for the latest high-tech gadget, the Amazon Kindle, but that's old hat for him. The bigger news in online banking circles is Richard Branson gracing the cover of the December/January issue of Fortune Small Business (click on the inset to read the magazine online). His smiling mug is shown tossing hundred-dollar bills out of a teller cage. 

The reason: Virgin Money USA (previously Circle Lending) is one of six new products/services the magazine included in its annual "The Next Little Thing for 2008" series. To be part of the article, the innovation must be coming from a "small business," although I'm not sure Virgin qualifies as small anymore.

The 1.5 page story discusses the Business Builder "friends and family" loans that Virgin will administer for a one-time cost of $199 to $299 plus $9 per payment. The company says it plans to offer a business loan product later in 2008 or 2009 that will match outside money to the original friends and family loan, provided it's been paid on time. 

Could 2008 be the year of person-to-person lending? Given Branson's track record, there's a good chance the relatively unknown service will take off next year.   


1. According to my recollection. 

American Express Plum Card Update

As promised in its teaser print buy, American Express delivered my Plum Card invitation in the wee hours Monday morning (2:06 AM Pacific time, see screenshot below). The message, with my first and last name in the salutation, was short and sweet and directed me back to the main website to apply at <>.

It's all first class work, but the generic call-to-action surprised me a bit since I'd put my name on the "wait list" last week (see post here). I expected a more personalized invitation and link. The website doesn't appear to recognize me either (see screenshot below).

Email Invitation (1 Nov 2007)

American Express email invite for Plum Card 

Plum Card homepage (5 Nov. 2007)

American Express Plum Card homepage

Advanta Creates Social Network Around Small Business Innovation: Ideablob

I don't know how I missed this one, but Advanta, a major credit card issuer with 1.2 million small business customers, launched a new Web 2.0 microsite on Sept. 24 at the high-tech DEMOfall conference (press release here). Just being there amongst the digerati was a coup for the card issuer, but they did much better, managing to come home with a coveted DemoGod Peoples Choice trophy at the conference.

The Web 2.0-laden site is called ideablob, and it's a place where entrepreneurs, inventors, and anyone else can post their business idea and compete for the monthly $10,000 prizes (contest rules here).

One month after launch, the site is generating a fair amount of activity. The eight October finalists showcased on the homepage (see below) have received the following: 

  • 691 total votes (must be registered to vote, can vote on more than one idea)
  • 216 total comments (must be registered to comment)
  • 10,300 total views (anyone can view the idea)

Traffic to the site should grow rapidly once word of the $10k prize circulates. That's a large incentive for the millions of Internet users who think they have a better idea. 

Advanta, which uses fairly subdued branding on the site (see small "inspired by Advanta" under the main ideablob logo), is positioned to gain in three ways:

  • By associating its brand with innovation, social networks, and a Web 2.0 attitude
  • Assuming a good viral kick, and $10k/mo should do it, the site could generate leads more cost effectively than through other channels
  • Publicity in blogs and traditional media

Bank of America launched a good business networking site recently, but without the fun of the $10,000 in prize money (see previous coverage here).

Advanta's ideablob main page (25 Oct 2007)

An idea page

First Look: Bank of America’s New Networking Site — Small Business Online Community

In the past 10 years, we've seen dozens of bank-powered sites targeting small businesses. Citibank ran one for a few years called Bizzed. Back then, they were called "portals." Now, they are "social networks." But the purpose remains the same: Create a destination site for business owners to learn how to run their business better while reinforcing the bank brand as small business savvy.

In general, it's a good idea. But it's extremely difficult to get traction with small business owners who usually lack the time and/or interest to read extensively about how to run their business (note 1).

Bank of America's effort, Small Business Online Community, tries to get around the attention problem by creating forums where specific questions and answers can be posted (press release here). Again, not a new concept, but probably the best way to get something like this off the ground.

I registered (see note 2) and spent a few minutes poking around the site. In addition to the forum, the site includes columns by business experts and reader-submitted stories. It will be interesting to see if the so-called user-generated content in the latter category is all self-serving promotions from the small business participants, or meaningful perspectives that allow conversations to begin.

The well-designed site, with Web 2.0 touches, is off to a good start from a registration standpoint. This morning alone (as of noon Eastern time), 300 new members had signed up. They may all be bankers in disguise, but it's still far more than I would have expected.

Other than the small "powered by" link in the upper right corner, the site doesn't appear to have any direct involvement from the bank. Frankly, I'd like to see bank officers weighing in on the financial topics, as long as they take a consultative approach and disclose their affiliation. But I understand the bank's initial restraint.


1. However, entrepreneurs in the research phase, what is sometimes called "pre startup," often devour reams of material. And since they are often highly interested in financing opportunities, a bank-sponsored site could gain their attention.  

2. A couple nitpicks:

  • Usernames are case sensitive; a twist that tripped me up when trying to log in the first time. The bank should remove that stipulation, especially in a less security-sensitive application such as this.
  • Lots of the material is available as RSS feeds, but other than the little orange icon, it's not very obvious how to subscribe via RSS or email. 

Bank of America Integrates Small Business Financial Services into Microsoft’s Startup Center

It's extremely difficult to win the transaction accounts of small businesses. By the time you know of their existence, they already have their bank accounts in place. And most small businesses are too busy to bother switching accounts to save a few bucks a month, or even to get better products or services.  

One way to grab market share is to find businesses when they are in the pre-startup phase, before they've set up banking accounts. In pre-startup, the prospective business owner is in pure research mode, spending little or no cash. To find these businesses, you need to offer online information that startups value and can find at your site, such as new-business planning advice. Then entice the owner to establish bank accounts with a package of services that appeal to a new business owner.

Bank of America is on the right track with its sponsorship of Microsoft's new Startup Center <>. It's more like a product placement than a "banner ad" sponsorship. The BofA logo is never even seen in the main content area.

However, the bank's content is tightly integrated throughout, especially in the Finances area. For instance, if a business owner wants to "set up a checking account," the links to detailed information such as "compare now," "get a recommendation," and "get a business check card" all link directly to content housed on Bank of America's website (see screenshot below).

MasterCard is also a primary sponsor, but its content is less integrated. The third core sponsor is Startup Nation.

Microsoft Startup Center Finance section

It makes sense for Bank of America to be involved in Microsoft's Startup Center, a  beautifully designed tool all decked out in "Web 2.0" colors and graphics. The content seems appropriate and useful for a startup. However, it will be a challenge for the area to gain traction with actual startups, who are unlikely to be looking to Microsoft for assistance, unless they are software developers.

But you don't have to be a mega-bank or mega-software company to provide valuable services to startups. Financial institutions can partner with local professional service firms such as accountants, consultants, and attorneys, to create content for startups such as Webinars, and in-person seminars. A well-priced package of banking services, positioned and priced for startups, will help you grab new business in the startup sector.

Examples of startup products and services at financial institutions:

For more information, see our Online Banking Report on Small and Microbusiness Online Banking (here). Thanks to Payments News for the link.

Internet Banking Pioneer Chip Mahan Takes the Helm of Banking Startup Targeting the Pet Care Industry


I first met Chip Mahan in 1995 when he was at the helm of Cardinal Bancshares and about to launch the first Internet-only bank in the world, Security First Network Bank. That effort eventually spawned S1 Corporation, now a leading banking tech company, with a half-billion market cap. 

Unfortunately, the Internet bank was sold off and eventually shuttered by Royal Bank, in a move I've never quite understood. Why would you take the pioneering brand name in one of the hottest sectors of the last 25 years and just close it down? Royal didn't even bother spending the $9/yr to keep the domain name <>, now a generic link site. 

After his stint at the helm of S1 ended in October, Chip is back in the banking business taking the reins of startup Live Oak Banking Company. The Wilmington, NC-based company is still in formation. But it recently passed a regulatory milestone, raising $8 million in capital from fewer than 10 investors (see note 1, 2). David Lucht, who worked with Mahan as a credit officer for Cardinal Bancshares, is the Live Oak's President.

Live Oak was recently profiled in the local business press (here), and will apparently specialize in lending to veterinarian practices and kennels. 

While a number of banks target health care practices including veterinarians, none appear to be aggressive online marketers with the possible exception of Bank of America, which is the only mainstream financial institutions using Google to market vet practice loans (note 3).  Also, BB&T's Vine Street Financial lists vet practices on its menu of commercial health care lending services (see inset).

With Mahan at the helm, its almost certain their will be a web-based component to the bank's strategy. This is the long-tail of lending at work, targeting a highly specific area that needs a national focus in order to create enough volume to survive. Eventually, we expect to see national lenders targeting hundreds, if not thousands, of business niches online.

For more information on small business strategies, refer to Online Banking Report #107/108 (here).



1. It looks like the company may have registered the URL <> as their URL, but its not currently live and the registration info is unlisted.

2. Here's what the North Carolina banking commission has listed for the company:

  • Required capitalization: $8 million
  • Prospective employees: 15
  • Address: 2605 Iron Gate Dr., Wilmington
  • Principals: James "Chip" Mahan, CEO; David Lucht, president
  • Focus: Business lending to vets, kennels and children's day care operations

3. Source: Google search, 14 June 2007, from Seattle IP address, 2 PM PDT

Remote Deposit Sightings: Wall Street Journal & PNC Bank

It takes a long time before a new process or technology becomes "conventional wisdom," something that is accepted at face value without questioning its pros and cons. While we are still years away from that happening with remote deposit technology, at least the mainstream press has picked up on its benefits, one of the first steps towards mass adoption.

The latest example was in today's Wall Street Journal special Small Business section. In "Branching Out," a general article on banks' growing interest in small businesses, author David Enrich prefaced an Aite Group "levels the playing field" quote with this (p. R6):  

Remote deposit makes it less important to select a bank based on its location or number of branches–which many big banks tout as a key selling point.

The key take-away here is that banks should make sure remote deposit services are prominently featured in checking/cash management offers aimed at attracting new business clients. 

Google search on remote deposit capture CLICK TO ENLARGE For example, PNC Bank is currently running a remote deposit promotion with a free scanner for customers who sign up before the end of April (see landing page screenshot below). The service is powered by Bankserv (PNC data sheet here;

The promotion is well-placed on Google, with the fourth-highest AdWords placement giving PNC the top-right slot (see inset).

However, neither the promotion or remote deposit are mentioned on the bank's main business checking account marketing page (see second screenshot below). We like the promotion, the first we've seen advertising a free scanner via Google, but the bank seems to be missing the chance to grab new accounts with the freebie.  

PNC Bank landing page from Google search on "remote deposit capture"
(Seattle IP address, 19 March 2007, 9 AM PDT)

PNC Bank landing page from Google search on "remote deposit capture"

PNC Bank main business checking page (19 March 2007)

PNC Bank main business checking page (19 March 2007)

Digital Insight Now Officially Part of Intuit

Link to Digital Insight website Intuit's $1.3 billion acquisition of Digital Insight closed yesterday, marking the beginning of a new era of innovation in small business online banking (previous coverage here). It's a market that's been underserved for years (see Online Banking Report'sSmall- and Microbusiness Online Banking, #107/108).

Intuit, which has iPod-like domination of small business accounting and bookkeeping via Quicken and QuickBooks, can now leverage the software relationship into the banking relationship.  The bloggers at Intuit's QuickBooks team-blog expanded on that theme here, discussing their goal of integrating electronic invoicing and payments into the bank site:

Why the purchase? One reason is to try to sell functionality of our record-keeping software as a service through banks, letting small businesses create, send, and get paid for invoices, all online at a bank's site. With millions of QuickBooks customers, we think we have some insight into small business' needs…. We learned from our tax return business how quickly packaged software can move to a Web service. Last year, for the first time, more people used the online version of our Turbo Tax Web service than the desktop version.

This is not necessarily bad for financial institutions. In fact, it probably levels the playing field for the smaller banks and credit unions that are the core of the DI client base. Through integration into Intuit's accounting products, smaller banks will be able to offer sophisticated small business solutions that equal or surpass what Bank of America or Wells Fargo offers today.