While several lenders have historically offered loan services to start-ups, Brex is looking to take advantage of the increase in venture debt financing with a $150 million fund. The newly launched Brex Venture Debt will look to compete with the likes of Silicon Valley Bank, American Express and Bank of America Corp. to offer early stage venture-backed businesses an alternative financing option.
Brex, which ranked No. 6 on this year’s CNBC Disruptor 50 list, offers start-ups high credit lines and software to manage their finances and credit lines. While its main product – an unsecured, high-limit charge card for start-ups – exposes it to money-losing companies that could fail in droves, the company manages risk by using real-time data on customers to help make dynamic lending decisions.
Henrique Dubugras, co-CEO and co-founder of Brex, said on CNBC’s “TechCheck” on Wednesday that this additional loan service with Brex Venture Debt will give business owners the capital needed to expand their business.
“If we have our customers grow by giving them more loans that maximize their ownership, they grow and become bigger customers for Brex,” Dubugras said. “This market is ripe for disruption, and we are going to lead with flexibility, speed and transparency.”
Compared to traditional banking, Dubugras said Brex’s loan services will not have “shady terms,” and it will actually work to grow their customer’s businesses.
“A lot of lenders will say, ‘Hey, I’ll loan you $4 million but you have to keep $4 million in your bank account,’ and that doesn’t actually extend runway or help with anything,” Dubugras said.
Though Brex will have to balance risk management with their more flexible loan services.
“If you’re not willing to extend your customers’ runway, there’s actually no point of the loan,” Dubugras said. “The way we risk manage is just by picking the best companies out of the Brex customers.”
In April, Brex raised $425 million at a valuation of more than $7.4 billion, more than double its previous $3 billion private value. Additionally, the company says it grew total customers by 80% this year alone.
