Why Tech Startup Brex is Redesigning Credit Just for E-Commerce Brands

Financing the daily workings of an e-commerce brand can be a complicated task, even when profitable. From marketing costs and inventory investment to work travel, brands need to spend money. So far, there have been few dedicated credit solutions to accommodate this. Enter fintech startup Brex. The firm rolled out its e-commerce offering last month and now counts shoe company Soludos among its customers.

“We are a seasonal business, and when we get into season, our spend scales really quickly,” said Brigid Foster, chief operating officer at Soludos. “We were constantly maxing out our corporate card and spent way too much time managing and paying down on the card so we didn’t miss opportunities to fund marketing to our e-commerce customer.”

These challenges aren’t unique to Soludos — something that Brex recognized and decided to capitalize on. Its existing credit service for startups, which includes 30 days of credit and a robust rewards program attached to the card, wasn’t suited to the e-commerce business model. Startups tend to have cash in the bank but need an approved method of payment; e-commerce companies are looking for working capital on top of that.

The new e-commerce offering combines both traditional corporate cards with a line of interest-free capital, acting as both credit card and bank. While the card itself doesn’t earn rewards, users do receive discounted access to relevant services and software they tend to use, like WeWork, Google Ads and Amazon Web Services. They also receive a 60-day credit limit instead of 30.

Traditional credit card companies like Visa and Mastercard
Traditional credit companies often require personal credit scores for corporate card approval, while Brex looks only at the business’ financials.
CREDIT: Matt Rourke/Shutterstock

“For e-commerce businesses, it takes about 60 days for them to get inventory, buy ads, market it and sell it; 30 days isn’t enough,” said Michael Tannenbaum, CFO at Brex.

Instead of charging interest, the company makes its money through the interchange — that’s the fees credit card companies earn from the merchants accepting the transaction. To offset some of the financial risk, Brex only approves brands that have been in business for a year or longer and that generate over $50,000 in sales a month. The approval process includes looking at the business’ bank account and at their data on e-commerce platforms such as Shopify or Magento, rather than personal credit scores.

So far, Tannenbaum reports popularity among brands in the apparel and accessories space, especially those that use Instagram as a primary market and need funding for ads. For Soludos, introducing Brex has allowed for greater marketing spend but has also increased its financial flexibility. Foster stressed the importance of being able to respond quickly to opportunities and for brands to factor this into their budgets.

“The cost of borrowing is clearly important, but so is the ability to fund opportunities that may not have been on your radar when budgets and cash projections were done — last-minute opportunities,” said Foster. “For us, it’s important to have flexibility, so when we find an opportunity to increase marketing spend to generate incremental sales, we have the funds to support the initiative.”

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