One of the most frustrating parts of being a small business owner is scraping by each month when clients don’t pay their invoices.
BlueVine is a business-to-business startup that offers advances on invoice payments (“factoring”) up to $500,000, as well as lines of credit up to $50,000.
BlueVine is a Palo Alto startup that offers to small businesses (SMB’s) lines of credit as well as factoring, a popular service in which a company like BlueVine pays a big portion of the invoice in advance (for a fee, of course) to make sure your company has the cash flow to keep operating. Payments are made on the same day of your application or the following day.
The company’s CEO, Eyal Lifshitz, recently wrapped up a $40 million round of funding that included major cash from Citibank. He graduated from the prestigious University of Chicago Booth School of Business and worked at Texas Instruments, McKinsey & Company and a pair of investment firms.
The company has solid roots and funding, but we wanted to know about the kinds of products they offer. We also wanted to figure out what borrowers and other companies are saying about Blue Vine, as well as answer the all-important question: Is BlueVine the right solution for your company?
As a small business ourselves, we know how important it is to have cash on hand to pay employees, move forward with projects and keep operations running smoothly. Is BlueVine the company that will help you do that? Keep reading!
As we mentioned before, the company offers lines of credit and invoice factoring. Since these are two distinct types of loans, we’re going to look at each one individually
Invoice Factoring: What Are The Amounts and Fees?
BlueVine’s invoice factoring page claims that they can provide credit lines of $20,000 to $500,000.
How To Get The Funding
After providing them information about your business (including your social security number), the company looks at your credit history, your clients’ reputation, your company’s earnings and other factors to determine if and how much they’ll advance to you.
Once approved, you sync your accounting software with their site so you can seamlessly request advance payment on invoices of your choosing and have your customers pay invoices through BlueVine.
However, you should take note of the basic requirements for applying:
- You must have a credit score of at least 530
- Your company has to have been in business for at least three months
- Monthly revenue is at least $10,000 per month
- Is business-to-business or business-to-government
Now, stop for a minute and think about what those requirements say. BlueVine is willing to lend you money even if you have a terrible credit score. Your business doesn’t need that much revenue, and it doesn’t have to be but three months old.
To us, these requirements allow people who would otherwise not be able to receive a loan from a bank – 80 percent of SMB’s, according to Lifshitz – to get money when common sense says it’s not a good idea.
But part of the way BlueVine determines your financial standing is by assessing the reliability of your clients. So, even if you don’t have a great credit history or financial record, you could get factoring based on the good reputation of your clients
The Fees You Can Expect to Pay
BlueVine charges a 0.4 to 1 percent up-front fee for the factoring amount the give you. Your fee, manager David Clayton told us, varies from other companies based on several factors that include your creditworthiness and the creditworthiness of your clients.
A late fee of 3 percent is assessed two weeks after your client was due to pay the invoice. It doesn’t seem like that much, especially if you’ve never borrowed large sums of money.
If you’re a small business who took an advance out on a $40,000 invoice, however, 3 percent becomes a $1,200 late fee, which is pretty hefty.
If the balance is paid in the third week after the due date, the late fee is returned and you’re all square. However, if the invoice isn’t paid after the third week, you’ll pay every week at an interest rate of between 0.2 and 0.3 percent per day, BlueVine Manager David Clayton told us.
David went on to say that BlueVine is discerning in who they accept for the factoring program, telling us they try to avoid businesses who are faltering and need factoring to continuously bail them out of theirfinancial woes.
Aside from the late fee and per-day interest charge on overdue accounts, you’ll pay a $15 fee every time BlueVine money is wired to your account. ACH transfers, however, are free. BlueVine isn’t charging you a lot on the little things, and that’s because, we believe, they make their money off the terms of their line-of-credit program.
Lines of Credit: What Are The Amounts and Fees?
According to BlueVine’s website, SMB’s can apply for lines of credit up to $50,000. A business can use all of that money or part of it without added penalties or fees.
The requirements for getting a line of credit are a little different than they are with invoice factoring. According to BlueVine’s FAQ’s, borrowers must have:
- A credit score of at least 600, not 530
- A business that’s been operating at least 6 months, not 3 months
- Revenues of at least $5,000 per month
The Fees You Can Expect to Pay
A line of credit is different than factoring because a line of credit is given as a loan, kind of like how you charge things to your credit card and pay those purchases back with interest.
Factoring is a bit more secure because you’ve already done the work for the money and are getting paid ahead of time. So, unless your client bails out on you, you only pay an up-front advance fee; no daily interest charges apply.
According to David Clayton, line-of-credit payments are due weekly and carry an interest rate between 0.4 and 1.2 per week. Borrowers have 26 weeks to pay off their loans.
So, if you borrow $40,000, weekly interest at 1 percent would be $400. Each month you’d pay $1,200, which amounts to an APR of 36 percent, which is, in our opinion an extremely high fee.
Those fees don’t seem to be bothering BlueVine’s reviewers, though, the majority of whom have good things to say about the company.
What Are Other People Saying About BlueVine?
We found that nearly 500 reviewers on two different websites rate BlueVine well:
- Intuit’s App Center: 255 reviewers gave a 4.5-star rating
- Trust Pilot: 5 stars from 170 reviews
- Merchant Maverick: Writer Bianca Crouse gave the site 4.5 stars
Many of the positive reviews we read praised the site’s ease of use and the speed with which they get their money.
Our Final Thoughts: Is BlueVine a Good Fit For You?
Since BlueVine offers two different types of financial help, we’re going to split this conclusion into advice about factoring and advice about lines of credit.
Factoring is Helpful But Can Be Expensive
BlueVine’s invoice factoring service can give a huge boost to a company whose clients pay 30 or 60 days after services were given or completed.
Having those huge gaps of income can really put a business in a jam, especially if they’re just starting out or are looking to expand their staff. No SMB owner wants to close the doors on his or her dream just because clients weren’t paying up.
David gave us a great example of this, citing a customer who is competing with bigger companies who can afford to wait 30 or 60 days for invoice payments.
“I was talking to a guy in the manufacturing and distribution industry. He uses BlueVine because his competitors give clients the chance to pay after 60 days,” David said. “This guy is small and he doesn’t have cash to wait 30 or 60 days for payment.”
Remember, though that you’re on the hook for a big penalty as well as daily interest penalties if you don’t pay up. Our advice? Only apply for factoring if you know your clients are slow to pay but reliable. If you don’t have the cash flow to cover an unpaid invoice, it can cost you a ton of money.
However, we do like that BlueVine offers a two-week grace period after the invoice due date and that the 3-percent penalty is waived if you pay the invoice before the three-weeks past due deadline.
Lines of Credit Carry High Fees
For entrepreneurs who find themselves in a tough financial spot or want a little extra cash for purchases, BlueVine offers a really easy way to secure a line of credit. That credit comes at a price, though.
BlueVine’s weekly rate of 0.4 to 1.2 percent may not sound like a lot, but when you crunch the numbers like we did a few minutes ago, a weekly charge of 1 percent actually equates to some really high APR’s.
In our opinion, BlueVine is a little different than other consumer websites offering lines of credit. They seem to try and weed out problem borrowers/accounts by vetting each applicant’s financial stability as well as the stability of their clients.
“We do a lot of checks from both public and non-public sources,” David said. “We use those and our algorithms yield a net score of someone’s overall financial strength of their business and that’s what we use to determine who we’ll work with.”
Determine Your Need and the Cost
But, just as we advise the average consumer to be wary of companies offering quick cash, we’re advising you to take a moment and assess your company’s financial standing and your personal creditworthiness before taking out a line of credit with them:
- Do you absolutely, 100% need the money right now?
- Are you willing to pay between 0.4 and 1.2 percent each week to borrow the money?
- Do you have the discipline to pay back your line of credit on time?
If you answer “no” to any of those questions, we recommend holding off on using a service like BlueVine to acquire extra money. Take a moment to get to the root of the problem and ask yourself if a same-day loan is the answer.
You might also want to consider other factoring companies on the market. Fundbox is an example of a relatively new startup who offers some of the same services as BlueVine. Click here to read our review about Fundbox.
BlueVine is unreliable
I was originally a factoring client of BlueVine and the experience was positive.
They started to offer flex credit (credit line), and I started using that service, initially with good results. But over time, the BlueVine became completely unreliable and vague in their reasoning for not allowing credit or certain credit limits.
I have been using Fundbox since, and without incident.
Bottom Line: No, I would not recommend this to a friend
A life saver!The best company ever! Just log in an invoice and get paid the next day. Of course your client must be a reputable company. This is great for small companies working for large clients that take 30 days or more to pay.
Bottom Line: Yes, I would recommend this to a friend