***Please read the update at the end***
As a freelancer, in-between my long-term projects, I take on smaller clients and quicker projects. Often these projects don’t function within the pay terms of my larger and more established businesses. For these payment schedules, I typically work on retainer, and dictate that I am paid upfront at the start of every month. I vet my clients and projects carefully and everyone receives a contract that has been vetted by an attorney. After a few missteps years ago, I’ve learned the importance of setting up boundaries regarding payments. However, I’ve been hearing horror stories more and more from other freelancers who are getting clients who are 60 to even 90 days behind. Any freelancer or small business knows, when you’re waiting for a larger payment, it easily means the difference between making your mortgage or instead, making a mess out of your bank account.
Enter, Fundbox. After seeing a few recent ads on my timeline about the service, I decided to investigate their fees and terms to see if it was going to help, or hinder if I ever found myself in a bind. First and foremost, something my financial spirit animal, Nicole Middendorf has always taught me is that money isn’t easy. We must ask the right questions up front to find out how fees are assessed in everyday loans and be willing to look at every bit of the contract. Fundbox didn’t look like a scam, although I could find very little information about the company or user reviews.
The first thing I wanted to know was what the fees looked like. Is Fundbox a payday loan service in disguise? I didn’t think so, but I ventured on further to decide. Fundbox claims:
“Fundbox has no setup fees and no subscription fees, only an invoice clearing fee that you pay when you choose to clear an invoice. This fee is determined based on your business’ health and specific invoice properties. To give a better sense of specific pricing, the fee for clearing a $1000 invoice ranges from $10 to $60. Pricing is also based on your Fundbox history so the longer you use Fundbox and the more invoices you clear, the lower the clearing fee becomes.”
A few things to keep in mind: Fundbox is very clear that these loans, are not for individuals and do not function like payday loans. If you look at section 3.3, Fundbox states that since you are allowing it into your 3rd party accounting software, (Intuit, etc.) that they will collect necessary information and then preform background checks not only on the company, but you as an individual. In section 4.1, Fundbox asserts, “We will only use Customer’s Data to perform Background Checks on the Customer and to provide our Service to the Customer (the Data Uses, as defined above). Customer hereby provides Fundbox a non-exclusive, worldwide, transferable, assignable, license to use, reproduce, display, copy and store Customer’s Data for the purpose of performing the Data Uses. Customer retains ownership of its Data.” Are you alright with a company reproducing and displaying your data? Ironically, as of 9:50CST on 1/17/2013, their Privacy page that their TOS referred to, did not exist.
This, is where it gets very interesting, legally. If I was the CEO of a small, private business, according to section 4.5, I would be giving explicit permission to Fundbox to do background checks on any of my officers, any time Fundbox liked. They even state they can look at your criminal record. The risk management professional in me recognizes Fundbox’s need to routinely revisit and assert that they are lending their resources and capital to my company. However, the privacy and security individual, wonders where the very light and grey line of personal privacy lies when others’ information is involved. Certainly they’d have to give consent for a background check. But most banks don’t make note of the fact that they’d do a background check of the leadership team, or “directors and officers.” To me, that’s a lawsuit waiting to happen. Make sure you are aware what information they will collect and alert your employees. It’s illegal to run a background check without someone’s consent and a manager or owner, cannot consent for their employees.
Ready to use Fundbox? Remember these 3, key things:
2.) Security is security. Ask about encryption and where your records are stored should you decide to leave the service. You don’t want a surprise after you’re already gone.
3.) From big banks, to small start-ups, always proceed with caution. Remember that Fundbox is a company that is offering a service that is valuable, but, you need to know your fees and conditions upfront and in-writing. I ask my lawyer to review most legal documents and contracts before I enter into them and so should you. undbox made several notes in the TOS about late fees and other fees. But I couldn’t find clear amounts or percentages on the site. For me, if I can’t see an easy explanation of terms and fees, I’m very hesitant to invest any personal materials or information in a company.
Fundbox CEO, Eyal Shinar sent the following via email and I wanted to share: