Written by Chris Edge, founder of Urban Beard
I launched Urban Beard, Canada’s very first beard oil company, seven years ago with no external business financing and only $1,000 in my bank account. At that time Clearco, let alone Clearco alternatives, was not even a thing. Getting traditional small business loans for an e-commerce store was practically impossible. You had to have an extensive history of generating revenue.
Back then, I was on the hunt for a beard oil that could help make my beard look soft and healthy but couldn’t find the right product. That’s when I started experimenting with different ingredients and eventually found the perfect formula to keep my beard hydrated. As it turns out, thousands of men around the world were also facing the same challenge.
As my online business grew, I began searching for revenue-based financing options, bank loans, and other business financing solutions to aid with inventory as well as growth and marketing expenses. This became particularly difficult when we expanded beyond Shopify and started receiving wholesale orders and selling in retail stores. It created new challenges, such as the need to increase production and find a way to manage cash flow until we received payment from retailers.
I didn’t want to miss out on the business growth opportunities that came my way, such as collaborating with Trade Secrets, Express Men, and various barber shops in Toronto that sought to offer their customers high-quality beard care products. I recognized the significance of having a strong distribution strategy and did not want to depend solely on advertisements to generate revenue.
Over the years, I have explored various non dilutive financing options to fuel growth of my company. I even approached my local bank for a line of credit, but unfortunately, they were unable to provide efficient funding. This led me on a journey to search for a capital partner with equity free funding options.
In 2022, I began to hear more news about the challenges that Clearco (formerly Clearbanc) was experiencing. This prompted me to search for Clearco alternatives. I was looking for a lender who understood eCommerce sellers, offered reasonable pricing, had good customer support, a transparent fee structure, and most importantly, someone I could work with for the long term. Personally, I do not enjoy “shopping around for deals”. My passion is providing top-quality beard care products that help men feel more confident.
What is Clearco?
Clearco (previously known as Clearbanc) is a fintech company that offers non-dilutive capital solutions for startups and eCommerce businesses. Instead of traditional equity financing where companies give up a portion of their ownership to a venture capital firm, Clearco provides funding in exchange for a percentage of future revenue until the capital is repaid.
The best Clearco alternatives that offer revenue based financing
While Clearco was one of the very first companies to pioneer revenue-based financing for eCommerce companies, they went through challenging times in their existence, laying off 72% of their staff over the last 2 years, and halting their lending operation in US and Canada since July 2022.
Since then, other companies have sprung up as alternatives to fill the void left by Clearco, including Paperstack, Wayflyer, 8Fig, Kickfurther, and SellersFunding.
|🇺🇸🇨🇦 Excluding Quebec
What are Clearco financing terms?
When Clearco was active, they charged a fixed fee for the growth capital that they advanced. In my experience, fees related to financing digital marketing campaigns, such as running Facebook and Google ads, or paying agency fees, were quoted at 6%, with an average payback of 3 months. It also required that a merchant like myself would use a credit card issued by Clearco, which allowed them to earn additional credit card processing fees called “interchange” from Mastercard. Capital for any expenses outside of paid advertising would have a flat fee of closer to 12%.
Today Clearco charges anywhere from 6.5% to 19%, depending on the amount being borrowed and how long it will take to repay the advance back.
What are the requirements to receive funding from Clearco?
To qualify for an advance from Clearco, the eCommerce seller has to be in business for at least 6 months and have predictable recurring revenue with a minimum of $10,000/mo in sales.
Clearco supported companies incorporated in the United States, Canada, United Kingdom, Germany, Ireland, Netherlands, Austria, Belgium, and Finland.
Ease of Use. Clearco made it easy to access financing with just a few clicks as the full process was fully automated. Small business loans under $150,000 were made relatively easy which removed friction normally present when applying for bank loans.
Large funding limits. Given the relaxed nature of their underwriting, Clearco was able to accommodate large sums of funding as a percentage of the overall revenue or a track record of a merchant.
Inconsistent experience. Given the multiple iterations that the company had to go through, several products were discontinued, the underwriting and approval processes became more stringent, and funding was not always available for reasons quite unknown.
Sales-driven organization. The company was known for its sales culture, and was quite aggressive in pursuing prospective customers, obtaining contact details online and frequently calling and emailing their prospects several times a week, even after the merchant would opt-out.
Reaching customer support was challenging at times, the wait times were long, while issues related to billing were not always resolved in a timely manner.
Paperstack as a Clearco Alternative
Paperstack is a Clearco alternative that works with wholesale, retail, and DTC brands, providing them with working capital to purchase inventory, invest in advertising, and fund payroll.
What is Paperstack?
Launched in 2021, Paperstack is a financial operating system for eCommerce companies, allowing Shopify and Amazon sellers access working capital to help purchase inventory, invest in marketing, and finance payroll.
Similar to Clearco, Paperstack is able to provide funding within 24-48 hours, underwriting eCommerce loans based on eCommerce, accounting, and financial data.
How much does Paperstack charge?
Paperstack charges a fixed fee for the growth capital they provide. Merchants pay a fee of 4% – 12% to access up to $5M in working capital. Over time, Paperstack is able to reduce its fees, once they have a sufficient repayment history with a merchant.
What are the requirements to receive revenue based funding from Paperstack?
In my experience, merchants that generate at least $25,000/mo in sales, located in the United States and Canada, and have been in business for at least 12 months will qualify for financing from Paperstack.
During the onboarding process, their team members will present several funding offers, and discuss how additional capital can support eCommerce business’ expansion goals.
Flexible funding options. In my experience, working with Paperstack allowed us to access funding on our own terms. Being able to create a funding schedule that matches the cash flow needs of our business was a real game changer.
Responsive team. Sales and customer service is available throughout the day, and can be reached by phone, text, or email. They tend to respond quickly, and make it their priority to get to know their customers.
Omni-channel support. Paperstack is the only Clearco alternative that can incorporate wholesale, retail, B2B, and DTC sales into their underwriting, allowing consumer brands to access more funding at better terms
Strict underwriting. Paperstack takes into account a variety of financial metrics, including revenues and expenses, often rejecting highly unprofitable small businesses that have seen their sales decline significantly during the recent period.
Wayflyer as a Clearco Alternative
Wayflyer is another Clearco alternative that focuses on providing business loans to European eCommerce companies and certain qualifying sellers in the United States and Canada.
What is Wayflyer?
Wayflyer is a lending company that offers flexible funding solutions for eCommerce businesses. Founded in 2019 and based in Ireland, Wayflyer aims to provide fast and flexible funding options to help eCommerce small businesses scale and grow.
Wayflyer’s mission is to help eCommerce businesses achieve their goals – by providing access to unsecured, non-dilutive funding to solve cash flow challenges and unlock sustainable growth.
Currently, Wayflyer provides merchants with up to $20M in growth capital to spend on inventory and fund marketing campaigns to expedite customer acquisition.
How much does Wayflyer charge?
According to my knowledge, Wayflyer charges a fixed fee between 2% and 10%, depending on certain factors such as the financials of the business and the funding amount being advanced as a percentage of revenue.
What are the requirements to receive revenue based funding from Wayflyer?
Wayflyer has 3 main requirements, similar to Paperstack and Clearco – revenue, location, and years in business (tenor).
Location: currently supports companies incorporated in the United States, Canada, United Kingdom, Spain, New Zealand, Ireland, The Netherlands, Belgium, Denmark, Australia, Sweden, and Germany.
Tenor: 6 months in business.
Revenue: at least $20,000/mo in average online revenue, for the last 6 months.
International presence: Wayflyer supports customers in several North American and European countries, making this an ideal choice for brands looking to expand internationally.
Flexible funding for later-stage companies: Based on the communication Wayflyer sent out, they are focusing a lot of their effort on brands selling $100M+ annually, and are looking to access up-to $50M in funding. This is where Wayflyer can offer flexible payment terms.
Based on what other merchants have reported, the Wayflyer team has been re-focusing their efforts on the European market, tightening up their requirements in the US and focusing on larger brands in North America to reduce risk.
8Fig as a Clearco Alternative
8Fig is a Clearco alternative that works with merchants to help them identify achievable revenue goals, and provides eCommerce loans for expansion projects.
What is 8Fig?
8Fig is a growth capital provider for eCommerce sellers. Instated of providing unrestricted funding, 8Fig works with its customers to create what they call a “grow plan”, allowing merchants to set business goals and request funding required to achieve those goals in the context of the growth plan.
In addition to providing growth capital to eCommerce brands, 8Fig also works with wholesalers, suppliers, warehouse operators, and supply chain companies.
How much does 8Fig charge?
In my experience, 8Fig charges $6,000 – $10,000 for every $100,000 that they advance, or an equivalent of a 6% – 10% fee. Each advance is tied to a specific growth plan and carries if own set of fees and expenses.
In addition to fees, customers need to demonstrate financial ability to contribute up to 20% of projected expenses upfront towards each growth plan budget. In other words, merchants need to have sufficient bank balance in order to finance up to 20% of the projects themselves, before 8Fig will agree to provide an eCommerce business financing loan.
What are the requirements to receive eCommerce business loan from 8Fig?
8Fig is ideal for eCommerce businesses located in the US or Canada (excluding Quebec). 8Fig’s customers tend to be in business for at least 12 months, and have reached an annual revenue of at least $100,000, with a minimum monthly revenue of $8,000 over the past three months.
Appropriate for small businesses in the earliest of stages. Given that 8Fig only requires $8,000 in average monthly revenue, it may be an approachable funding option for eCommerce sellers that are just starting out.
Flexible funding options. 8Fig is a flexible alternative to Clearco that allows eCommerce merchants to articulate their own use of funds through a custom “growth plan”, allowing them to access financing outstanding marketing spend and inventory.
Restrictive. Since 8Fig approves merchants for funding, based on the growth plan they submit, eCommerce sellers are required to prepare financial projections in their business plan and articulate attainable goals. This approach requires a significant investment of time and resources, and a good understanding of financial modelling which is not always available to early-stage founders.
Capital-intensive. 8Fig encourages merchants to contribute up to 20% of their own funding towards growth goals. This buffer acts as collateral that helps 8Fig minimize the risk of their eCommerce business loans going into default.
Kickfurther as a Clearco Alternative
Kickfurther is a Clearco alternative focused on providing on-demand eCommerce business loans for inventory purchases and product launches.
What is Kickfurther?
Kickfurther is a marketplace that connects brands looking to purchase inventory with lenders that are willing to provide financing in exchange for a fixed monthly interest payment.
Unlike other Clearco alternatives, Kickfurther does not lend money directly and instead relies on its extensive network of micro-lenders to crowdsource funding for each eCommerce business loan.
Kickfurther takes possession of inventory as collateral, until the e-commerce brand is able to sell the inventory and repay its lenders on the Kickfurther platform.
How much does Kickfurther charge?
Kickfurther does not publicly disclose its pricing. However, based on several conversations with eCommerce merchants who successfully raised funds from Kickfurther, KF clients should expect to pay a 10% – 15% fee for the eCommerce loan from Kickfurther investors on the marketplace.
Several eCommerce clients cited a 5% fee that goes directly to Kickfurther for facilitating the listing, while a 10% fee is paid out to investors who contribute their money to the project.
What are the requirements to receive funding from Kickfurther?
Kickfurther works with US-based brands that have reached at least $400,000 in annual sales. Only physical inventory can be funded through Kickfurther, and businesses have to demonstrate that the products that are being sold comply with Federal and State regulations.
Marketplace of lenders. Kickfurther helps merchants raise money from a sizable community of lenders that are willing to finance inventory in exchange for monthly income.
No guarantee of success. As any crowdfunding marketplace, Kickfurther does not directly lend money to eCommerce sellers and cannot guarantee that the project will get funded.
Complex structure. Unlike other Clearco alternatives, Kickfurther requires merchants to create a project listing and propose a repayment schedule in order to raise funding from lenders on the marketplace.
Hidden fees. Kickfurther contract has the least transparent fee structure, involving many service fees, success fees, administrative charges, and late payment penalties.
SellersFunding as a Clearco Alternative
SellersFi is a Clearco alternative that provides longer-term business loans for up to 24 months.
What is SellersFunding?
SellersFi (formerly SellersFunding) is a fintech company that supports eCommerce brands with growth capital and value-added services to help eCommerce businesses reach their potential.
SellersFunding facilitates financing for inventory, marketing initiatives, product launches, international expansion, and more.
How much does SellersFunding charge?
The eCommerce business loans from SellersFunding are priced anywhere between 1.25% to 50% fixed fee. This is because SellersFunding can offer financing with a payback term ranging from 1 month to 24 months, with an annualized interest rate or APR of up to 25%.
What are the requirements to receive eCommerce business loan from SellersFunding?
SellersFunding requires merchants to be located in USA, UK, Canada or Australia, be in business for at least 6 months, and generate a minimum of $20,000/mo in sales.
Flexible terms. SellersFunding provides financing for up to 24 months, allowing merchants to utilize the funds towards long-term projects, such as international expansion and new product launches.
Variety of products. Besides working capital, SellersFunding offers invoice factoring, business credit cards, buy-now-pay-later solutions, and analytics tools.
Personal credit checks involved. Unlike other Clearco alternatives, SellersFunding conducts a personal credit inquiry on business owners to determine funding eligibility.
Why I went with Paperstack
After evaluating several options I decided to proceed with Paperstack.
Ultimately I wanted to work with a company that offered very straightforward financing options, making growth finance simple, but also something I could customize given the time of the year. Because my brand is omni-channel it was particularly important for me to have Paperstack include my wholesale and retail sales into their underwriting in addition to my Shopify sales.
There are some periods when we are in a cash crunch as we prepare for holiday season or Father’s Day, or some months when we are heavily investing in advertising and need to work with e-commerce lender who understands our cycle.
Finally, it was important for me to be able to pick up the phone and reach the senior members of the team. Issue come up, and having direct access to executives at Paperstack made me try and kept me coming back to this company.
About the Author
Chris Edge is a founder and a president of Urban Beard, a beard grooming e-commerce company that manufactures all products in-house with locally sourced and natural ingredients. Chris is on the mission to provide education and premium products at a reasonable price, to the thousands of urban beards across Canada.