Small businesses have long benefited from the Internet, through everything from e-commerce to Web advertising.
Now, a new type of online service is helping to solve a much more systemic problem: They cut out unnecessary middlemen when it comes to matters of money.
To date, small businesses have had few options when it comes to raising funds and negotiating terms and fees. But new sites are changing that, initiating a shift that is putting power into the hands of business owners.
Why go through a broker when a website can connect you directly to organizations that want to invest in your business? Why waste your time scoping out the best fees or finding the best partner when a website can aggregate the best options with just a few clicks?
Instead, these new sites serve as the most efficient middlemen, saving small businesses time, money and needless frustration.
Plus, unlike the dime-a-dozen websites created by anyone who knows how to code, these are ventures run by credible business people, with loads of experience in their fields.
FundingStore.com is one of these sites.
President Michael Badham is a chartered accountant and the former head of Canadian corporate finance at accounting behemoth Deloitte. His British-based partner, Nick Montague, who launched the same site in Britain, has a similar background.
The two men aren't simply vying for profit. Over their decades of experience, they saw how unnecessarily difficult it was for small businesses to raise money, and they think they have a way to streamline the process.
"For a small business, to raise about $1-million is still the hardest thing to do in the capital markets," Mr. Badham said. "You're sort of caught between $50,000 from friends and family to start your business, and the $5-million or $10-million you need to catch somebody's attention at a bank."
"It's all about percentages," Mr. Badham added. Advisers may make 3-per-cent commission on a deal, and that cut on $1-million "barely gets you started" at a big institution.
That's where FundingStore comes in. Business owners fill out an online form that asks a few quick questions, like what stage their company is at (start-up to pre-IPO), the purpose of the funding (from acquisitions to replacing existing debt), and how much money is needed.
The application is then forwarded to lenders looking for new prospects.
The website's key selling point is that the lenders are sources of capital that small businesses have likely never thought of, or that the low-level employees who serve them at their banks would not know to point them toward. Examples could be angel investors or export lenders, or even a distinct division of one of the big banks that most people don't know about.
"Business owners who don't have any financial training don't have any knowledge of where to go" to raise money, Mr. Badham said. "Generally, they aren't part of an ecosystem that will point them into the capital markets."
In effect, FundingStore functions as online dating site, the eHarmony of the small business world.
But how many small businesses could benefit from such a service? A whole slew, according to Peter Hatges, head of corporate finance at KPMG in Canada, who has no affiliation with the website.
"I think it goes without saying, any quantum of money is hard to borrow, never mind a small amount of money," he said.
Amounts in the $1-million range are particularly tricky, he added, because they "take as much effort and time to complete as a big transaction," but for less money.
To make the funding requests more appealing, FundingStore offers things like standardized application forms. That way, when a business submits a proposal, the lender isn't shuffling through unorganized papers that make the borrower small seem unprofessional.
There is also an online academy devoted to explaining the different types of funding available, because so many small businesses don't know what kind of money they need, or even what is available – whether it be a term loan, asset-backed lending, working capital loans or invoice financing.
FeeFighters.com is a similar business, except it targets small businesses that process credit card payments.
Currently, credit card vendors charge egregious fees to merchants, and the businesses that rely on this service have no negotiating power because the market is hard to navigate and fees are not openly disclosed.
FeeFighters aims to end that by creating a virtual marketplace. "We are bringing transparency to a market that has been completely opaque," said Canadian head Marcus Dagenais.
Much like FundingStore, FeeFighters asks small businesses to fill out a short form and then matches their card-processing requirements with vendors who have signed up for the site and who agree to disclose a monthly all-in cost that encompasses all of the hidden fees.
The small business can then choose the lowest price available, or pay up for a service that best matches its needs. They key point is that the choice is theirs.
In exchange for brokering the deal, FeeFighters is paid a fee by the credit-card company.
In the same way that FundingStore was started by accountants, FeeFighters was founded by people who know credit cards. Sean Harper, a former Boston Consulting Group consultant with case work in the payments industry, started the company in the United States. Mr. Dagenais, his Canadian partner, works in the credit card processing industry north of the border.
The big looming question is whether or not the credit card companies will play ball, considering that FeeFighters garners low fees. "They see it as a necessary evil," Mr. Dagenais said. The credit card companies could make less per contract, but those that participate have easy access to more potential clients.
FeeFighters has already signed up three-quarters of Canada's nine credit-card processors and Mr. Dagenais is using his industry connections to get the others involved.
When pitching the idea, he highlights that the website simply cuts out middlemen. The vendors are "still going to get paid at the end of the day," he said.
Editor's Note: An earlier version of this online article and the version published in Wednesday's Globe, contained incorrect information. This version has been corrected.