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Clearbanc Review – Merchant Cash Advances
When it comes to starting or running your own business, financing is critical. If you don’t have the money to purchase all of your critical assets, pay expenses, and make payroll, it’s going to be challenging to build your company and make it profitable.
In fact, over 80 percent of the businesses in the United States that fail do so because of cash flow problems. It doesn’t have to be that way, however.
These days there are more options than ever for businesses to obtain the cash flow they need to get started and be successful. One place that many companies turn to is Clearbanc.
If you are preparing to start a business or run one now, this Clearbanc review will tell you everything you need to know about using Clearbanc’s merchant cash advances (MCAs) to keep your cash flows healthy.
Onto our Clearbanc review!
What Is Clearbanc?
Clearbanc is a venture capital company founded by entrepreneurs and investment veterans in Canada in 2015. The company is headquartered in Toronto, Canada, and has partnered with investors including Highland Capital, Emergence, Founder’s Fund, and Inovia.
The Clearbanc founders Michele Romanow of CBC’s “Dragons’ Den” (Canada’s “Shark Tank”) and CEO Andrew D’Souza raised $420 million alongside Ivan Gritsiniak, Charlie Feng, and Tanay Delima to initially establish the company.
Since its founding, a little over five years ago, Clearbanc, has rapidly grown to become one of the most significant investors in eCommerce startups.
The venture capital firm has achieved success by leveraging cutting edge artificial intelligence to guide its investment decisions, and by offering innovative terms and conditions to prospective startups seeking funds. Let’s continue with a more detailed look at this service with our comprehensive Clearbanc review.
Clearbanc provides growth capital funding, in the form of advances, to a select group of small companies. Unlike many other venture capital firms, Clearbanc does not take an equity stake in the companies it funds.
Instead, it charges fees on the advances it provides to these small companies. The companies receiving these advances pay them off gradually at a later time with future business revenues.
Clearbanc offers funding to certain startups and small companies ranging from $10,000 to $10 million, depending on the company’s needs and the potential of its business model.
It has invested over $1 billion in over 3,300 online businesses so far.
What is a Clearbanc Business Loan?
A Clearbanc business loan is actually a merchant cash advance (MCA). Clearbanc provides eligible businesses funds based on estimated future revenue streams, charging a fee that ranges between 1-20%, depending on your business situation. You repay the advance with future business revenue, and there is no set repayment date.
The Clearbanc advance process is relatively straightforward. For example, if your company receives a $10,000 advance from Clearbanc with a 6% fee, the total loan cost would be $600.
Shortly, when you have achieved target revenues and can repay the loan, your company will repay the advance daily based on the negotiated rate you agreed upon during the application process, until you’ve repaid the full amount of $10,600.
Unlike investors or venture capital funding, however, you’ll never have to provide an equity stake or dilute your company’s ownership when working with Clearbanc.
How Does Clearbanc Work?
Is Clearbanc legit? Clearbanc offers a select class of small companies growth capital, in the form of advances, that they can use to build their business. Companies that meet Clearbanc’s requirements can receive an advance (the $10,000 – $10,000,000 mentioned earlier), often within three business days.
Clearbanc does not take an equity stake in the companies receiving the capital; instead, the advance is fee-based and repaid with future business revenue. After receiving a Clearbanc advance, companies can apply for additional advances under certain conditions.
For example, they must have grown their revenue significantly since the first advance or added new income sources. Additionally, if a company did not max out the amount it received for the first advance or has paid 80 percent or more of that advance back, it may also be eligible for additional Clearbanc funding.
In addition to the aforementioned advances, Clearbanc also offers the Clearbanc Marketing Card, a Mastercard that companies can use to deal with marketing costs, such as digital ad spending.
Clearbanc Marketing Card
The Clearbanc advance is not sent to your bank in a lump sum like a typical loan or other forms of financing. Instead, it is held on a virtual Clearbanc Mastercard which exists online in your Clearbanc account and can be used to pay for all your business needs, such as paying suppliers.
For international bank transfers to purchase inventory, you will have to work with Clearbanc to vet each payee and approve all of the fund transfers. Clearbanc in turn debits your bank account according to repayment terms established when you received your advance.
Clearbanc Interest Rates
Clearbanc does not charge its customers interest on the funds it provides them. Instead, it charges fees based on a formula that takes a borrower’s revenue, business size, and overall market data into account.
Only companies in the eCommerce, Subscriptions, Mobile Apps With In-App Purchases, Marketplaces, or consumer Software as a Service (SaaS) sectors are eligible for Clearbanc’s services. Additionally, to qualify for an advance, a company must earn a minimum of $10,000 monthly revenue with at least six months of consistent revenue history and must be incorporated in the United States (or be an LLC).
Application and Approval Process
Interested companies can apply for a Clearbanc advance online. Beyond the basic information you have to provide, such as the companies name, its articles of incorporation, and EIN, address, and owners, you’ll be required to provide Clearbanc access to your revenue and marketing accounts.
Once you’ve provided this information, Clearbanc will calculate your term sheets for the use of funds; this calculation can normally happen within thirty minutes. Once this amount is calculated and approved, your business will normally receive its funding within a day or two.
Then, as your company makes sales of its products or services, it will return a percentage of that sales revenue to repay Clearbanc’s merchant cash advance.
Clearbanc will never take an equity stake in your company, and once this agreed-upon amount is repaid, your obligation to Clearbanc is complete.
The entire process, consisting of the application, term negotiation, approval, and transmission of funds for a typical business that meets all of the eligibility criteria can normally be completed in one to two business days.
If you need funds fast this is one of the key advantages of using Clearbanc. Another point to emphasize in this Clearbanc review is ownership and control; unlike an equity investment, where investors provide a business funds in exchange for a stake in the business’ future profits and often a say in its operations, owners get do not have to worry about their ownership stake or control being diluted after a Clearbanc transaction.
The process may take longer for businesses with unique circumstances, or companies that are requesting significant amounts of funds.
What Documents Will Clearbanc Ask Me For?
Required documents vary by business, but Clearbanc typically asks for:
- Articles of incorporation documents
- Government-issued identification
- Your employer identification number (EIN)
Additionally, you must connect your online sales and marketing accounts (Shopify, Facebook, etc), as well as your business’s bank account, to proceed with your Clearbanc application.
Below is a screenshot of the “Vendor” tab in the Clearbanc dashboard. Here you add the vendors you would like to transfer money to for Clearbanc to vet and approve.
Alternatively, you can apply for a Plastiq account and save money on fees as well as earn cashback rewards when you use your Clearbanc card with preferred vendors.
Clearbanc does not charge any fees to apply for an advance, charges no interest, and does not take an equity stake in companies that take an advance. Instead, Clearbanc charges a flat fee determined when a company applies for the advance.
Companies repay the advance with future revenue, at a repayment percentage rate of between one and twenty percent. The repayment percentage is also determined upon a company’s approval for an advance as well.
Clearbanc enjoys a rating of 4.5 out of 5 stars on Trustpilot, with 68 reviews. 84 percent of the reviews rated Clearbanc’s services as excellent, the highest rating. Conversely, only 6 percent gave it a “bad” rating.
Clearbanc’s positive reviews from customers highlight the company’s ease of use, speed, and quality customer service. Some of the poor reviews cite the burden that repaying Clearbanc had on their operations, as well as some challenges getting information and advice from Clearbanc; of note, several reviews indicate that it is difficult to understand the terms and conditions when they are signing up with Clearbanc.
Clearbanc Customer Service
When companies apply for a Clearbanc advance, they are assigned an account manager who works with them throughout the entire process. Additionally, customers can communicate with Clearbanc via a customer service telephone number, email, or through their online account portal.
Clearbanc Contact Number
Tel: +1 (415) 610-5166 (9AM – 6PM EST)
Clearbanc Shopify Comparison
Clearbanc Vs Shopify Capital
While Clearbanc and Shopify Capital Merchant Cash Advances are very similar in the way they operate, there are few clear distinctions. For example, Shopify has a much smaller barrier to entry and doesn’t require businesses to generate $10,000 in revenue for a six month period to be eligible for an advance like Clearbanc does.
Additionally, you cannot apply for a Shopify loan; instead, Shopify contacts you via an email as well as a notification in your Shopify account. Shopify’s cash advances are sent as a lump sum to your bank account, while Clearbanc uses a virtual Mastercard debit card for you to use for your marketing expenses. Finally, Clearbanc allows businesses to borrow considerably more money than Shopify does.
Venture capital firms and financial services companies that focus heavily on the eCommerce sector, such as Forerunner Ventures, 500 startups, and Greycroft Partners, are Clearbanc’s competitors.
Shopify’s Capital merchant cash advances and PayPal Working Capital loans are also similar to Clearbanc as well. Kickpay, Hercules Capital, SAAS Capital offer some financing options analogous to Clearbanc’s as well.
Additionally, online crowdfunding sites such as Kickstarter or Indiegogo offer the same type of ease of access that makes Clearbanc attractive to small firms.
Other alternatives to Clearbanc also include angel investors, which are often willing to provide seed funding and other funds to businesses in the sectors Clearbanc supports, albeit with an expectation of a share of future profits and/or ownership stake in the supported company.
However, Clearbanc envisions its cash advance services as more complementary to Venture Capitalist funding than in direct competition with them.
Fast-growing companies often need injections of capital to meet all of their requirements and keep building customers, sales, and capability. However, nearly 43 percent of current VC funding is now allocated towards marketing and ads.
Clearbanc believes its advances are the optimal tool for addressing short term expenses like marketing, which allows companies to instead direct their valuable VC funding to more critical activities, such as research and development.
As another low-cost financing option available in addition to VC funding, Clearbanc believes it provides unique tools to provide companies a competitive advantage to grow and thrive.
“43% of all VC dollars goes to Facebook or Google ads. Probably not the best use of VC funds. Save VC funding for R&D while we help you fuel your working capital expenses like marketing & inventory.”
Clearbanc Business Model
Clearbanc provides growth capital funding, in the form of advances, to a select group of small companies. Unlike many other venture capital firms, Clearbanc does not take an equity stake in the companies it funds. Instead, it charges fees on the advances it provides to these small companies. The companies receiving these advances pay them off gradually at a later time with future business revenues.
The Clearbanc founders Michele Romanow of CBC’s “Dragons’ Den” (Canada’s “Shark Tank”) and CEO Andrew D’Souza raised $420 million alongside Ivan Gritsiniak, Charlie Feng, and Tanay Delima.
Clearbanc is headquartered in Toronto, Canada, and has partnered with investors including Highland Capital, Emergence, Founder’s Fund, and Inovia.
The Pros and Cons of Using Clearbanc
Our comprehensive Clearbanc review will go through the advantages and disadvantages of the business loan.
- Credit Score. Since Clearbanc determines eligibility for its programs by analyzing a company’s business metrics, this loan does not involve a credit check, so applying for an advance with Clearbanc should NOT affect your credit score.
- Maintain Ownership of Your Company. Clearbanc does not take an equity stake in your company, so taking an advance will not dilute your ownership, or your ability to control the company’s direction the day-to-day decision making.
- High Funding Amounts. You may be eligible for up to $10 million in business financing from Clearbanc, depending on your company’s financials.
- Low Costs for an MCA. Fees on a merchant cash advance can run from 15-30 percent. Clearbanc’s reported fee of 6-12.5% is closer to what you’d pay on an origination fee for a business loan, which can be a major advantage for companies in the sectors Clearbanc focuses on.
- Startup Friendly. While you cannot use this loan to start a new business, you only need six months of consistent revenue to qualify for a Clearbanc advance. Clearbanc’s favorable terms are particularly advantageous for young companies, especially compared to several of the alternatives.
- Builds a Relationship. As your business grows, you can leverage an enduring relationship with Clearbanc to obtain larger amounts of funding through a streamlined process.
- Excellent Customer Service. Unlike PayPal, Clearbanc doesn’t treat you like just another number and offers excellent customer service.
- Mastercard Only. The Clearbanc advance is only available via the marketing Mastercard.
- U.S. Only. Clearbanc services are only available to US-based businesses.
- Steep Eligibility Requirement. Businesses must demonstrate the capacity to generate $10,000 in monthly revenue for six consecutive months to be eligible to apply for a Clearbanc advance. Immature companies that have not yet built this sort of sales capacity will be ineligible for Clearbanc’s programs.
- Limited to Select Business Segments. The Clearbanc advance is limited to companies working in the SaaS and e-commerce sector, and companies must be registered as LLCs or corporations to be eligible. If your company doesn’t operate in these sectors, you will have to consider other options for funding.
- Enduring Repayment. Repaying merchant cash advances take a percentage of your revenue for a long time, which can diminish your cash flow and limit your company’s options to grow and invest.
- Complex Terms and Conditions. In reviews, several past customers have indicated they never truly understood the terms and conditions before signing up for a Clearbanc advance.
Clearbanc Review: A Powerful Financing Tool for Small Businesses
If your young and growing business is like so many others out there, you are likely going to experience a critical need for cash at key times. If you want healthy cash flows that enable you to build your business and take advantage of fleeting opportunities, you should definitely consider using Clearbanc.
As this Clearbanc review has shown, your company can often rapidly get the cash it needs when it needs it by using Clearbanc’s services. Moreover, Clearbanc’s favorable repayment terms, as well as the fact that it doesn’t take an equity stake in any of the companies it funds means that repayment won’t be a burden, and ownership stakes in the company will not be diluted.
So, check out Clearbanc and what it has to offer, and see if it would be a good fit for your company’s needs today
Apply For A Clearbanc Loan
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Enjoy our Clearbanc review?
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