P2Binvestor Brings the P2P Model to Receivables Financing


Receivables financing is a $186 billion a year industry that has seen very little innovation. That is about to change. Just as Lending Club and Prosper have disrupted unsecured consumer loans P2Binvestor (P2Bi for short) aims to do the same in the receivables financing market. I sat down last week with the co-founders, Bruce and Krista Morgan (a father and daughter team) to find out how they intend to do that.

Don’t Call it Factoring

When people think of receivables financing they often think of factoring which can be the preferred financing method for desperate companies. It can be very expensive with APRs sometimes running into the triple digits. This is not what P2Bi is doing. The rates they charge are in the 18-25% APR range and they only work with growing companies – clients must have experienced three consecutive quarters of growth to be considered by P2Bi.

What P2Bi is doing in reality is providing a line of credit to businesses backed by receivables. Let’s provide an example to show how it works.

ABC Company sells widgets and has $100,000 in monthly sales, all on 30-day credit terms. They would like to borrow $80,000 to buy some new equipment. They cannot get a bank loan so the owner goes looking for alternatives. He discovers P2Bi and decides to sell his receivables to them. They sign a 12-month contract with P2Bi for them to manage $100,000 worth of receivables.

P2Bi analyzes his receivables and believes they are a good credit risk and so advances ABC Company $80,000 immediately of the $100,000 in receivables they purchase. ABC Company is able to go and purchase their new piece of equipment. As all the payments come in to P2Bi on the receivables of ABC Company another $18,000 is sent and P2Bi retains $2,000.

Providing More Than Just Financing

Our example is not quite done yet. This is where is gets interesting. As ABC Company makes new sales and brings on new customers P2Bi helps them manage this. In fact, they recommend that ABC Company not ship any widgets to a new customer until P2Bi has run a credit check on this customer and provides the ok.

In this way P2Bi has become more than just a financing partner, they are managing the entire receivables process for ABC Company. Because they are outsourcing to a team of credit experts ABC Company might find they have reduced bad debts and a faster collections process so there may be very little net cost to them for this entire service. At the same time they are getting 80% of their receivables in cash immediately.

Raised $1.2 Million in Series A Round

The P2Bi website launched last December and has been open to a small number of investors and two small business clients since then. In the interests of full disclosure I need to say that I am on the advisory board of P2Bi. They are a Colorado company and in fact one of the co-founders lives just a few blocks from my house.

They first contacted me back in 2011 about their plans to launch a p2p-style company for receivables financing and I have been following their progress closely ever since. A year ago I joined their Advisory Board, which has involved providing advice from time to time and attending the occasional meeting. It is an unpaid position although I have some stock options that will be worth something if the company does very well.

In late 2011 they raised a small friends and family funding round to kick off operations and just last month closed on their Series A round of $1.2 million. This is allowing them to build out their team, expand their software platform and do some serious marketing.

What About Investor Returns?

While they will provide no formal projections for investor returns, in their Finovate video Chief Marketing Officer, Krista Morgan, talks about a goal of 7-12% annual returns for investors. I can tell you in my own account that I opened in January has received annualized returns of 8.9% so far.

Those returns are certainly decent and on par with what many investors experience at Lending Club and Prosper. But here is the kicker and the reason I am excited about this company. Any investor can get their money back, in full, with 60 days notice. No trading platform to deal with, investors get 60-day liquidity because receivables financing has a quick turn – customers typically pay invoices in full within 30-60 days.

Right now there is $500,000 invested on the platform and they have a long list of investors ready to deploy capital once they have secured more deals. Speaking of deals there are two clients on their platform today: one is a carpet manufacturer in the Southeast whose largest client is Home Depot. There is also a medical animation company that creates custom animations showing how a device or drug mechanism works. They typical sell to large drug companies or device makers and have CVS Pharmacy as one of their largest clients.

P2Bi is open to accredited investors only right now but the plan is at some point to files an S-1 and make their offering available to everyone.


Like any high yield investment today this is not without risk. You have the typical platform risk that exists with any online lending platform. Although with the quick turn of receivables financing this is reduced somewhat, because most money is paid back in 30-60 days. In the event of a P2Bi bankruptcy what would likely happen is that another company would buy their loan portfolio and continue to service the loans.

The biggest risk for investors is fraud. A company could produce fake invoices that never intend to be paid and present them as legitimate to P2Bi. This is why P2Bi visits the physical offices of every client they onboard and runs queries on all the major fraud databases. Also, they only deal with clients who have business clients – they will not fund any business to consumer invoices.

Investor funds are segregated from P2Bi funds just like they are on other platforms. And like Lending Club and Prosper P2Bi recommend that investors diversify their investments across many deals. Within each client investors get automatic diversification because each investment is allocated to a small portion of every invoice.

One more note on risk. P2Bi takes out a UCC filing on every client and in the event of a bankruptcy at one of their clients they will be the senior creditor and be paid ahead of all others.

Final Word

This investment is not for everyone. For some the yield will not justify the risk. For others receivables financing will be forever linked with factoring and the exploitive nature of this kind of lending.

Here is my take and why I am excited about this space and in particular P2Bi. I have made an 8.9% annualized return on loans that are backed by real business assets. At the same time I have access to my money within 60 days. That to me is a good combination.

Here is a link to their press release today announcing their new funding round.

Disclosure: I am on the advisory board of P2Bi and so I have a vested interest in the success of this business. I am an investor on their platform but not an equity investor in their business. This article is not investment advice and is not a recommendation to invest with P2Bi.

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James Levy
James Levy
Sep. 16, 2013 10:44 am

P2Bi sounds really interesting. In the UK, Platform Black is having terrific success in this same segment of discounted invoices, and is receiving very serious investor interest as well a growing volumes of business. The P2P Finance revolution is about much more than just P2P Lending, the segment of discounted invoices for small business or trade finance is a huge new field which is also more than ripe for bank disintermediation. These are early days, and I am very grateful for these excellent reports from the field Peter that help me and many others to keep up with what is happening. Many thanks and best wishes.

Sep. 16, 2013 11:19 am


Peter, you wrote:

“Like any high yield investment today this is not without risk. You have the typical platform risk that exists with any online lending platform. Although with the quick turn of receivables financing this is reduced somewhat, because most money is paid back in 30-60 days. In the event of a P2Bi bankruptcy what would likely happen is that another company would buy their loan portfolio and continue to service the loans.”

Does platform risk entail the risk of the company operating the platform going bankrupt and the investors losing their money? If so, does this kind of risk apply to all P2P-lending platforms, such as Prosper and Lending Club?

samuel hu
Sep. 18, 2013 4:39 pm
Reply to  Peter Renton

Peter – I’ve been digging into this issue and LendingClub does have a separate bankruptcy remote vehicle in place called LC Trust I – however, only institutional investors can buy LC Trust I certificates.

Anyway, thanks for the post on P2Bi – looking forward to seeing how it turns out

Dan B
Dan B
Sep. 16, 2013 12:02 pm

So in order to finance their startup business of providing short term receivables financing to small companies, P2Bi, (which presumably cannot obtain adequate & cheaper financing elsewhere, itself having no history of sales & providing no collateral)…………… is instead borrowing money from people (i.e. accredited investors) at 7-12% & then re- lending it out at 18-25%. You’re right, it’s very smart………..for the owners of P2Bi. 🙂

The other thing that jumps out, is though I can see why P2Bi might want to involve themselves in the collections process of what they’re holding,…………..I can’t see why the company they’re lending to would want to get themselves in that type of arrangement on their subsequent revenue that has nothing to do with P2Bi, thereby allowing their “financing partner”, as you called them, so much unnecessary involvement in their business.

Dan B
Dan B
Sep. 16, 2013 4:28 pm
Reply to  Peter Renton

So calling & saying………”pay up or things will get very unpleasant”, didn’t work for you huh? 🙂
Seriously though, yeah I can see that reasoning, I suppose. When I was doing my previous business I sold on 30-90 day terms too. On the rare occasion that I had to call because customers would abuse the terms & drag it out or just not pay at all, I’d let it be known that they were on COD terms until they caught up. Did that work? Absolutely not, because they would counter that move by just not ordering from us at all. And I would counter that move by placing an order with them on terms & then not paying them. Believe it or not all this worked out fine 99% of the time.

Sep. 18, 2013 10:17 am

I’m not so certain if I like the type of companies they are going to be lending to. Doesn’t sound very different from factoring to me — there is a reason those small growing companies can’t get financing. The assumption is the peers can somehow do a better job analyzing (with likely worse info than a bank would get) the line. And from my limited experience in factoring, taking receivables as collateral isn’t as straight forward as you’d think. Lots of people end up getting burned.

They should be built like The Receivables Exchange.

James Levy
James Levy
Sep. 18, 2013 10:33 am


If I may, I would suggest that the central advantage of P2B lenders is not at all a question of doing ¨a better job analyzing¨. The advantage is basically one of cost and motivation. Banks have higher cost structures of dozens of obvious reasons, from marketing expenses to regulatory expenses to legacy costs of all kinds. Efficient P2B platforms can run on much tighter margins than banks can. Secondly, an perhaps most importantly, in general banks are simply not interested in making small business loans. Not only because this is (for the banks) a labor intensive business segment which creates loans that are not easily traded away through securitization, but also because the Basel II banking requirements place higher reserve requirements on loans to small businesses. Banks have much more profitable and less riskly businesses to pursue rather than making loans to small businesses which are at the heart of the economy. For example, they can borrow from the Fed, and then invest in goverment bonds, helping to finance the deficit which assures the reelection of politicians. It really is all very simple, and this is why alternate finance, either P2P or P2B is so important if we are ever going to break the grip of the banksters and corrupt politicians of both parties on the US economy.

Stu Lustman
Sep. 25, 2013 6:28 am

Hey Peter, due to the funds being used finance against receivables for a business, is it a requirement to be an accredited investor?