April 4, 2024

What is the Clearco Difference? Learn more about invoice funding for ecommerce

Andrew Curtis

The last 20 months at Clearco have been filled with wide-ranging change. As the kids say, "it's been a lot." In fall of 2023, we announced a series of actions to recapitalize and reorganize our business, ensuring Clearco's stability and long-term growth. While those transactions were critical to putting Clearco in the best position to serve our ecommerce customers, they were preceded by another, more fundamental change: a shift to a streamlined capital solution, which we call Invoice Funding.

The decision to pivot to a simpler, friendlier, and easier-to-understand product was undertaken in September of 2022, a period of significant challenge for Clearco. 20 months later, that bold decision has made all the difference, not only for Clearco, but for our ecommerce customers.

Today's Invoice Funding product, which ecommerce businesses use to fund direct payments to suppliers and vendors, is still in the revenue-based finance (RBF) product category that Clearco created for ecommerce businesses. That said, our product offering differs in key ways from our prior product, the "cash-in-bank Merchant Cash Advance (MCA)" which we pioneered in 2018, and which our competitors later mimicked.  

What is the difference between Clearco’s Invoice Funding and other ecommerce funding solutions?

  1. You only use Clearco when you need it 
    We don't ply customers with cash they don't need to deploy immediately; and we certainly don't overlever them with capital they may struggle to make payments on. With Invoice Funding, you tell us when you have an invoice you need to pay, and we provide the capital to fund you to pay your invoice. You therefore only pay for capital when it's being put to immediate use. Makes sense, right?
  2. You don't begin payments on the Clearco advance until you use it
    A hallmark of traditional cash-in-bank MCAs is that the capital provider begins debiting a customer's revenue account immediately after extending the funding – which the customer may or may not be drawing on and putting to use. In essence, cash-in-bank MCA providers collect some of the money they advance almost immediately, which serves their interests more than their customers’. With Clearco's Invoice Funding product, you only begin paying Clearco once you've actually used the capital to fund your invoice.  
  3. You don't pay fees on Clearco capital until you use that capital
    A corollary to #2 above is that we only charge you fees once we've funded you so you can pay your invoice. In a higher-rate and fee environment, what customer wants to pay for capital they're not using immediately?
  4. Your revenue accounts are not debited daily
    Most traditional RBF providers debit customers’ revenue accounts daily. Clearco debits once per week on the same day. While it may seem like a small difference, weekly debits allow our customers to plan and manage their cash better.
  5. Your payment amounts are “fixed”
    This may be the most important difference of all. Traditional RBF products’ payments are based on a so-called "remittance rate" which means customers commit to paying a fixed or set percentage of their daily revenues (remember daily debits!). This remittance rate does not change even when your revenues are growing rapidly. Imagine it's the fall and you're ramping inventory and marketing spend into Black Friday Cyber Monday (BFCM). Would you rather use precious revenue and cash flow to fund these expenses, or pay your capital provider ever-increasing amounts?

    With Clearco’s Invoice Funding product, customers pay a set percentage of their revenue but only up to a capped amount weekly. That means that if your revenue remains steady or is growing, you will pay a predictable, weekly "fixed" amount but if your revenues fall it could mean your payments shrink! 

With Clearco, you know exactly what revenue you're sending us, your capital partner, each week, which makes financial planning easier and more manageable and predictable. What's more, when your revenue is growing rapidly, you're not giving up more revenue/cash each day. That means you retain more revenue and cash flow to grow your business and fund inventory and marketing spend at key points of the year (like the fall!).

“Fixed” payment amounts matter for predictability when you’re scaling your ecommerce business

All of the differences above should be important to any rapidly growing ecomm business. But it may be #5 that matters the most. In conversations with customers since the launch of our Invoice Funding product, we have heard again and again how critical the predictability of payment amounts are. “Fixed” payments allow businesses to plan better and to allocate precious financial resources to their most productive use. That's music to our ears at Clearco because it tells us our product is doing what we care most about: fueling ecomms’ growth in a capital-constrained macroeconomic environment.

There's one more nuance to “fixed” payments  versus uncapped remittance rate-based products. We think of it as the dirty little secret of RBF products that take a percentage of your daily revenues regardless of your revenue growth. Stay tuned and we'll tell you all about it next week!

Andrew Curtis
CEO, Clearco

Andrew Curtis is the CEO of Clearco. Andrew has over twenty years of experience working in finance in New York City, including roles at investment banks Merrill Lynch & Co. and Lazard Frères as well as several investment managers. Before joining Clearco as an advisor in July 2022, he served as an advisor to Annaly Capital Management, a real estate investment trust focused on housing finance and the residential mortgage market.

Andrew has an extensive background in leveraged credit, liability management and financial restructurings, asset-based finance and securitizations. He graduated from Brown University and subsequently earned master’s degrees from the University of Chicago Graduate School of Business and The Fletcher School of Law & Diplomacy at Tufts University.