Standing out in the factoring field can be difficult. It’s a fairly basic process of paying drivers a day or two after an invoice is submitted, or maybe even the same day.
BasicBlock now has $78 million in new capital that will help it drive the interest rate on its factoring loans to zero.
BasicBlock announced Monday that it had secured a financing package worth $78 million consisting of both debt and equity. Although the financing is only now being disclosed, it has been in place since mid-November, according to co-founder and CEO Taylor Monks.
In an interview with FreightWaves, Monks declined to disclose the split between debt and equity in the package, but he said it was “definitely aggressive on debt for this round.”
He also declined to give an estimate on BasicBlock’s valuation following the new capital injection.
“Why we went out and grabbed this aggressive round is not really factoring at all,” Monks said. “I have seen a world that in a couple of years will have factoring at zero percent.”
Monks described the push toward a zero percentage rate as something that is BasicBlock’s “vision” over the next 18 to 20 months. “We want not only to factor on the same day but we also want to do it for free,” Monks said.
He conceded that such a plan “sounds crazy. … Trust me, I look in the mirror some mornings and think this is absolutely nuts.”
At the heart of what BasicBlock is doing is Monks’ belief that “we can make so much more money on other products around the financial space.”
He added, “We are not making money from truck drivers. We can make money from banks.”
Monks sees a market in which an ecosystem of banks, insurance companies and other providers of services are trying to capitalize on the trucking market with a variety of product offerings. Monks said he sees BasicBlock as a conduit through which those services can be provided to the trucking customer. “The future of BasicBlock is more underwriting and credit extension, but with factoring being a key piece in the data element,” he said.
BasicBlock currently is charging a flat rate of about 2% per factoring transaction, Monks said, but he added that the company has been “slowly stepping it down” in the last several months “as we’ve ramped up other products and other partnerships.”
The company has financial relationships with several institutions, Monks said, but he disclosed only one, Nelnet, which is on the list of capital providers in the latest funding round.
BasicBlock now offers many of the same services that other factoring companies can provide, such as a fuel card. But with new funding in hand and the tie with Nelnet — which coincidentally is located in Lincoln, Nebraska, home of BasicBlock — Monks said additional services can be extended to trucking customers. Recently a banking service was established through BasicBlock “that is specifically built toward smaller owner-operators.”
Part of the BasicBlock vision is to use the data that comes from its factoring relationships and provide it to the companies supplying other finance-based products for the trucking industry. That data can be in real time, Monks said, as opposed to data financial institutions are using now, which he said is often “stale.”
“We can give forward-looking data,” Monks said. “We can tell them how much they are driving, we can tell what they are hauling and for who. That allows the banks to say, ‘OK, this loan is safer than we thought it was.’”
Monks said BasicBlock’s driver base is growing 25% month over month “with extreme consistency” and that the financing round “really unlocked growth capital that was holding the company back.”
When pressed on the seemingly eye-popping growth numbers, Monks said the 25% has come with one salesperson “and that is not BS at all.”
Monks said another key part of BasicBlock’s value proposition is the lack of contracts. Drivers using its factoring services are not locked into BasicBlock.
“The fact that we don’t have contracts is a testament to how poorly they’ve been treated by incumbent factoring companies in the space,” Monks said, pointing out that BasicBlock has offered its services to get drivers out of existing contracts, “so that in itself has allows us to really gain the trust of these carriers.”
The participants in the fundraising round besides Nelnet included Autotech Ventures, Clear Haven Capital Management, Emergent Ventures, as well as continuing investment from Revolution’s Rise of the Rest Seed Fund, SaaS Ventures and TNT Ventures.