Clearbanc Growth Capital Review: 2020

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Clearbanc

Clearbanc provides innovative funding solutions for entrepreneurs with a promise to deliver between $10,000 and $10 million in growth capital in as little as 24 hours.

Clearbanc Growth Funding Facts

  • Factor Rate: 1.1 to 1.20
  • Amounts: $10,000 to $10,000,000
  • Loan Term: Monthly until paid
  • Minimum Credit Score: Any
  • Co-Signer: Not Applicable

  • Fees: None
  • Time to Funding: 1 to 2 business days
  • Hard Credit Check: No
  • BBB Rating: Not Accredited
  • Trustpilot Rating: 3.2 Stars

Pros & Cons

Pros

  • Great support when you need help
  • Quick approval and funding
  • No credit check required
  • Helps startups and new founders

Cons

  • Must have six months of revenue history
  • Only available for e-commerce and SaaS companies
  • Repayment is based on a percentage of revenue

Overview

The company has set out to support online-enabled businesses with more flexible lending that meets the demands of the fast-paced business environment. They are supporting this promise by relying on actual business data rather than a personal credit score for eligibility.

Online businesses would benefit most from the business loan options available at Clearbanc. The equity-free investments are unique in that they don’t require stock. Instead, the company is paid back by taking a portion of the borrowing business’s future revenue.

In this Clearbanc business loans review, you’ll learn:

What Types of Loans Does Clearbanc Offer?

Clearbanc focuses on a specific type of loan the company calls a merchant cash advance. What sets this business loan from Clearbanc apart is the relaxed eligibility requirements as compared to other lenders.

The introduction of AI in the decision-making process is also much different than the process of regular startup funding. Where traditional venture capital firms may take months of research and debate discussing the possibility of investing in a business, Clearbanc speeds up the process by relying on hard data and advanced algorithms.

Using actual business metrics to determine your eligibility rather than a regular credit check, applying for a loan with Clearbanc should not have any effect on your credit score. However, your business must have a minimum six-month revenue average of $10,000 and be incorporated in order to pass the AI check.

Merchant Cash Advance

Raising capital through standard loans can take months to process and usually requires businesses to give up a portion of equity. Clearbanc offers a different approach. The business loan you get from Clearbanc is actually a merchant cash advance, meaning the money you borrow doesn’t come with a fixed payment amount or a hard due date, and you don’t sign over any equity.

A merchant cash advance serves as an advance on your future sales, taking a portion of your top-line revenue for repayment in startups as young as six months. The money you borrow doesn’t require you to give up a percentage of ownership in your company or sign a partnership agreement. There’s also no compounding interest rate, though Clearbanc will add a 6% to 12.5% fee that varies depending on how you choose to spend the funds.

Clearbanc recognizes that marketing for growth capital is an expense that startups often struggle with. So, the company provides a Clearbanc Marketing Card after your cash advance is approved. This marketing card is a MasterCard that has money available to support your marketing efforts.

Your repayment amount is based on a percentage of your cash flow. Due to the fluctuating nature of online businesses, paying a portion of your cash flow makes sense. This form of repayment allows you to work payments into your cash flow management plan without leaving your business short on capital.

This loan is designed to target businesses in e-commerce or SaaS (software as a service). The company doesn’t currently have a program in place to fund your startup if your business falls outside of those two categories.

Specifically, Clearbanc has funding programs for:

  • Direct-to-consumer companies
  • Subscription-box based companies
  • Online retailers
  • Mobile apps and games with in-app purchases
  • B2B SaaS

Clearbanc: Rates and Terms

Terms

Clearbanc takes a unique approach to investment funding. Typical business loans establish set conditions that require you to repay the cash you borrowed according to a specific payment schedule. However, Clearbanc understands that business revenue can fluctuate, which can have a direct impact on your cash flow. They offer a flexible repayment alternative, which is a feature you won’t find anywhere else.

Rather than having a set due date, the terms of your loan agreement depend on your repayment percentage and the total amount you borrow. For instance, if your loan amount is $10,000 and your rate dictated you pay back 6% of your revenue each month, you would pay 6% of your monthly revenue until the entire $10,000 loan balance was paid in full.

With Clearbanc, there is no specific monthly payment requirement, and your term will last for the time needed to repay the total amount plus fees. Having a payment customized to your future business revenue is an advantage of choosing Clearbanc. Not only are you allowed to manage the cash flow in your day-to-day operations, but you can easily account for fluctuating business returns throughout the year.

Rates

Clearbanc is a different type of lender in that the company doesn’t offer standard APR rates. Part of the reason is that the money you borrow is considered a merchant cash advance rather than a traditional loan. You’ll still pay a percentage in fees, but what you pay isn’t considered an APR. The rate can vary because percentages are based on your business metrics. Factors such as your revenue history and market data play a major role in determining what you pay.

Your rate is set at the beginning of your application process. Clearbanc works with you to determine the best rate for your business and will disclose the percentage before you make the decision to take out any cash. Unlike a variable-rate loan that can change the amount of your monthly payment as interest rates go up and down, your rate will stay the same throughout the entire repayment process.

Typically, the rate you’ll pay ranges between 1% to 20% of your future revenue. Having a set amount to pay each month that doesn’t rely on economic conditions can protect you from drastic increases and decreases that can impact your bottom line. Instead, having your payment reflected as a percentage of your revenue allows you to manage cash flow around your loan payment and keep your business running smoothly.

An important consideration is that you won’t continue to pay a percentage of your future revenue for the life of your business. Clearbanc caps the amount you repay at the total amount that you borrowed. Once the amount you borrowed is repaid, your monthly payment obligation is over.

Fees

Clearbanc does not charge a fee to apply for a merchant cash advance, so there are no origination fees or withdrawal fees. While the application process is free, you pay a fixed price for each advance that can range from 6% to 12.5%. The amount you’re charged varies according to how you spend the funds. Money spent on ads from the approved vendor list, including Facebook, Google, Amazon, Pinterest, and Twitter, is charged the lowest available percentage.

You will know what the fee is before you accept an offer, so you can make a strategic decision based on what’s best for your business. Additionally, the money you borrow isn’t subject to periodic or compounding interest since Clearbanc doesn’t charge an APR to its borrowers.

The company also doesn’t rely on your credit score to determine what fee you might pay. The flat fee that is charged is based on the results of the company’s analysis of your business data. Clearbanc tailors the price you pay to the nuances of your business. Your revenue, business metrics, and market data are used to calculate your fees.

Clearbanc Loan Requirements

The identity of both you and your business must be verified prior to receiving an offer from Clearbanc. A credit check is not required, and no minimum credit score is needed to be approved.

You must verify your business by submitting its Articles of Incorporation. Your government-issued photo ID is needed to verify your identity, and Clearbanc may also request your social security number and employee identification number (EIN).

Part of the verification process requires you to connect your business bank accounts to the company’s platform in order to allow your revenue data to be analyzed. Revenue is a pivotal factor in determining your eligibility. Being able to examine your bank account information provides a clear picture of business performance for Clearbanc’s algorithm to quickly assess your application according to the company’s qualifying criteria.

To begin the application process, individuals can submit their information on Clearbanc’s registration page.

Qualifications

Your credit score is not part of Clearbanc’s approval process. However, the application will analyze other information about you and your business to determine whether eligibility criteria are met. The qualifications you must meet to be considered include:

1. Type of Company

Clearbanc currently provides limited financing for a few select business structures. The company has plans to expand to offer additional lending programs but can only lend money to e-commerce and consumer SaaS companies at the time of this writing.

The classification of e-commerce opens the door to a wide range of companies, including direct to consumer companies, subscription-box based companies, and numerous online retailers. Additionally, SaaS is a popular business model because the setup allows for stronger network security, greater collaboration, and straightforward pricing options. As an umbrella category, these businesses can include a variety of options such as mobile app companies and those that develop games with in-app purchases.

2. Revenue

Due to the non-dilutive funding solution that Clearbanc provides, your business must meet certain revenue standards to qualify for an advance. Specifically, you must have at least six months of consistent revenue history.

Many startups may not meet this requirement. If your company is brand new, make sure you have enough capital to provide cash flow to your operations for at least six months in order to take advantage of the merchant cash advance from Clearbanc.

Your average monthly revenue must also be at least $10,000. Repayment calculations are based on a percentage of your future revenue, and Clearbanc needs to ensure your business can make your monthly payments. The minimum revenue requirement can minimize the risk Clearbanc takes while providing you with the money you need to fund your business.

3. Business Classification

Your business must be incorporated in order to qualify for a Clearbanc advance. The requirement to have your business set up as a corporation or limited liability company has legal advantages that accompany those classifications. These setups can safeguard both you and Clearbanc from certain legal ramifications.

Many startups begin as an individual or sole proprietorship. However, those business structures aren’t eligible to borrow money through a Clearbanc merchant cash advance.

If you need additional funding and your business is a corporation or limited liability company, Clearbanc may even invite you to apply for more than one advance at a time. There are specific requirements to qualify, such as repaying at least 80% of your previous advance, acquiring a new source of income that significantly increases your revenue, and not having taken the maximum amount on your first advance.

4. Bank Account

Connecting your bank account to your Clearbanc application allows for a quick and automated analysis of your business performance. AI will use this data to determine your eligibility. Your financial information is protected by military-grade encryption, and your data is processed in the most secure manner available.

5. Geographic

Although specific information is requested for businesses located in North America, Clearbanc’s funding options aren’t limited to that geographic area. Companies can apply if they do business in the United Kingdom, Australia, New Zealand, Barbados, Thailand, and dozens of other countries around the world.

6. Other Requirements

Verification of your business is a crucial step in the approval process. Clearbanc requires that you submit your Articles of Incorporation documents and a government photo ID for review. For businesses operating in North America, you must also send your social security number and EIN.

If you have a business partner, you may still qualify for an advance. However, Clearbanc may require each partner to go through the verification process before approving your application.

Time to Funding

Traditional venture capitalist funding can take months, but Clearbanc has streamlined the process to eliminate the long wait time. The company introduced “The 20-Min Term Sheet,” which allows businesses to apply for amounts between $10,000 and $10 million in approximately 20 minutes.

Once your application is approved and your contract has been countersigned, your funds should arrive within 24 hours. Clearbanc acknowledges that large amounts can take an additional day to process, though your money is generally ready to spend within 48 hours.

Repayment

The repayment process is straightforward. Clearbanc will deduct regular monthly payments automatically from your bank account according to the rate and schedule that you have agreed to. With automatic payments, there’s no worry about whether your payments will be made on time. You must remember to have enough cash in the account to cover the transaction, although that shouldn’t be an issue considering your payments are based on a percentage of your revenue.

One important note is that your repayments will automatically be collected from the bank account you linked to Clearbanc during the application process. The amount you pay depends on the percentage rate you agreed to in the lending contract. Payments will continue until your loan balance is paid in full.

The Clearbanc Customer Service Experience

Clearbanc’s customer service is committed to a quality experience. The company prides itself on the fact that entrepreneurs built and designed the entire loan process around the challenges entrepreneurs often encounter when trying to do business.

Clearbanc takes a non-dilutive approach and advances your experience with a fair funding process that requires no equity or personal guarantees from you. Your account includes a Clearbanc dashboard to make your cash advance easy to understand and lists your marketing card details in a user-friendly format.

The customer support center at Clearbanc can be reached from 9 a.m. to 6:00 p.m. EST on any day of the week. You can contact Clearbanc:

  • By phone: (415) 610-5166
  • By email: info@clearbanc.com

Customer Feedback and Reports

Clearbanc has not been awarded a rating from the Better Business Bureau and doesn’t have any reviews on Trustpilot.

Reviews on Glassdoor, one of the largest job and recruiting sites, are favorable. Current and past employees give the company a rating of 4.7 out of five stars. The internal reviews indicate 93% of staff approve of the CEO, and 93% would recommend working at Clearbanc to a friend. How a company treats its employees can give potential borrowers insight into how they may treat their customers.

Reviews from customers about Clearbanc’s services from other third-party sites across the internet mention:

  • Quick and great customer service
  • Payback on a set term with no surprises
  • A company that works with you to make sure your payments are manageable

Final Thoughts

Clearbanc is a definite contender if you’re looking for capital for your startup. Entrepreneurs can enjoy streamlined access to capital without going through months of research and reporting to qualify for traditional funding options.

Clearbanc has a few limitations, such as requiring an average revenue of $10,000 over a six-month period, but the company can give you an offer in as little as 20 minutes. The funds are released quickly and are typically available in 24 hours. For e-commerce and SaaS companies, Clearbanc provides opportunities to grow your business without sacrificing your equity.

About Clearbanc

Clearbanc is a Canadian business that is headquartered in Toronto. The company was founded in 2015 as a venture capital firm with a focus on providing non-dilutive financing through revenue-share agreements for startups.

President and co-founder Michele Romanow provides strong leadership for the company. Her experience as an angel investor on Dragon’s Den introduced her to the struggles that startup businesses face when trying to gain access to capital from traditional funding sources. To help entrepreneurs get the money they need, Romanow guides Clearbanc as the firm caters to small businesses seeking growth and expansion.

Forbes has recognized Clearbanc’s automated system as democratizing traditional funding. Using AI technology, the system reviews a business’s financial health and revenue data. The result is a quick loan decision in a fraction of the time required for traditional funding operations. In fact, the company was featured in TechCrunch for disrupting venture capital with “The 20-Min Term Sheet,” which provides cash to businesses without needing a seat on the board or a personal guarantee.

As of August 2019, the company has raised $1 billion, given capital to 791 businesses, and reported an average monthly revenue of $121 million. Several well-known companies have already partnered with Clearbanc on its mission, including Magento, Cratejoy, Authorize.net, Hawke Media, and others.

Clearbanc believes in being upfront about their fees and offers complete transparency before a borrower is required to accept any offer. Business data, such as revenue, business metrics, and market data, is instead used to determine the fee a business must pay. Throughout the repayment process, payments remain fixed, and there is also no periodic or compounding interest to worry about.

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