Financeit Canada Inc., a startup helping small businesses provide consumer financing, announced last week it had raised $13 million in a Series A funding round, backed by TTV Capital, Inter-Atlantic Group, and Second City Capital.
Founded in November 2010, the Toronto-based startup gives small to mid-sized businesses (SMBs) the chance to offer consumers financing solutions, instead of just cash or credit options. Traditionally, that’s been the domain of major car dealerships, or big box retailers like Best Buy and The Brick.
The goal here is to provide SMBs with the same tools, says Casper Wong, Financeit’s chief operating officer. He adds that so far, the startup has signed up more than 3,000 small to mid-sized businesses (SMBs) in Canada, racking up about $500 million in loans.
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“Financing is a proven way to increase your sales, to increase your close rates, and to increase your transaction size, by offering the consumer a great kind of incentive,” he says, adding it’s especially helpful for SMBs selling big ticket items.
“What we decided is, there’s this huge hole in the market … we decided that we should take a shot at building something to utilize those strategies and box them up and give them to small businesses.”
For example, one of Financeit’s customers, EQ3, operates a chain of furniture stores in Canada. On average, the store would sell a couch for about $1,500. To boost sales, it set up a financing promotion that offered a plan of either six months, with no payments and no interest, or 0 per cent interest financing for 18 equal payments.
“To qualify, the customer would have to spend $2,000. They knew that the customer, if they were interested in this financing program, they would have to buy accessories, extended warranties, or upgrade the fabric,” Wong says.
“All of these items, that the customer has to get to do the transaction, increase the profit margins tremendously because smaller stuff typically increases profit margins.”
However, SMBs also stand to benefit from Financeit’s tech components. Unlike the financing plans available for big box retailers, Financeit has built an online platform, which is also available on iOS devices, and it uses e-signatures to avoid requiring SMBs to store documents.
The company is also cooking up another feature called Financeit Approval. Typically, a customer setting up a financing plan has to show a store employee details about his or her financial history. But Financeit Approval would allow customers to check if they’d be approved for financing, even before they go to a store. SMBs who are signed up for the platform will be able to link it on their their Web site, as another offering for their customers.
Financeit Approval is currently in beta mode right now, but it should be available to all of its customers soon, Wong says.
Pricing-wise, Financeit doesn’t charge SMBs any fees. Instead, it passes on loan administration fees to consumers borrowing the amount, and it also works on contracts with lenders and banks. However, extras like Financeit’s marketing program do come with costs.
Still, Financeit is still trying to grow its business by reaching out to more SMBs, Wong says. One way is through education – for some SMBs, it may be difficult to trust a startup to provide their financial services.
However, Financeit has to submit to the same security checks as banks since it provides financial services, he adds. Everything is encrypted with bank-grade security, requiring multi-factor authentication, and Financeit’s data is housed on its own server.
As for the newly announced $13 million in funding, Wong says the plan is to take that money and make a foray into the U.S.
“The U.S. is a market that’s 10 times as large as the market here in Canada,” he says. “So the number one thing is getting us live out in the U.S., so that includes really scaling out our operations, ensuring our technologies comply with two different jurisdictions, and beefing up management.”
It will also use the funding to build out its point of sales solution, adding in online order forms, price tags, posters, and brochures for its merchants.
Financeit is also making a round of hires. Right now, Financeit employs about 45 people, and it aims to boost that number to 55 by January or February 2014, Wong says. The company expects to have about 100 employees by the end of next year.