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Can This Startup Shift the Landscape of Corporate Cards?

credit card in a hand on a black background
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Monday, 15 October 2018 09:19 AM Current | Bio | Archive

If large credit card issuers weren't already aware of a startup named Brex operating in their space, they are now. According to reports, the company has sealed a $125 million funding round, which means Brex is valued at a little over $1 billion.

Brex's business model is simple: Provide credit cards for startups. It exceeds its mission by offering relevant benefits like access to the Visa network, expense management tools, higher credit limits and security fraud protection.

The company also uses a new approach to assess the credit risk of startups, going beyond credit scores, according to PYMNTS.com. In combining a high level of funding with easier access, Brex may change an industry and lead to more confidence in startups across the world.

Why Brex Might Change the Landscape

Brex has piqued the interest of star investors such as Peter Thiel, according to reports. This has led to more attention on the company: If Brex succeeds, it could establish a tidal shift in the way startups fund themselves. As TechCrunch notes, Brex doesn't require a personal guarantee or a deposit for the funding it provides. And with credit limits up to 10 times higher than the traditional methods of startup funding, it's no surprise the company has accumulated more than 1,000 customers already.

As Brex co-founder and CEO Henrique Dubugras told Nasdaq.com, "Traditional financial services are stuck in the past; they have systems in place that have worked for decades but don't work for 21st century startups." According to Dubugras, Brex has created a platform that "bypasses" the issues of traditional banking. The flexibility and quickness of achieving funding through Brex also make it possible for startups to ramp up production and growth much quicker than before, allowing them to become agile—which could potentially affect their overall success rate.

With high-tech investors showing just as much confidence in Brex as Dubugras, the increased funding could point to far-reaching influence that's set to have an impact on more corporate clients. That's especially true as more and more corporate accounts and startups find out about Brex credit card services.

Going Beyond Credit Card Funding and Payments

Brex's high-limit credit card isn't the company's only appeal. Its customer service and product features move the company beyond mere credit card funding, allowing Brex to establish innovations in this space. Those include:

  • Immediate response: Once a company is approved by Brex, it can immediately use a "virtual card" until the physical card shows up. That allows a company to move more quickly on purchases and order fulfillment.
  • Money management: App integration, such as using a phone to keep track of expenses and receipts, makes Brex's products easy to use.
  • Expense tracking: This is especially important for entrepreneurs working 60-hour weeks.

A Threat to Crowdfunding?

Crowdfunding is not a fad—it's a funding option to which many startups can reliably turn. But not every crowdfunding story is a success. Startups looking for funding can overlook the potential hassles and exorbitant fees of crowdfunding by using an alternative source like high-limit credit cards.

How will Brex hold up as it looks to expand its market while offering high limits to notoriously high-failure prospects? Brex has a plan in place that has earned the respect of Silicon Valley investors. As it expands its offerings and makes inroads into the world of startup funding, it may offer competition to mainstream credit cards as well as crowdfunding platforms.

Joe Resendiz is a Research Analyst at ValuePenguin, where he focuses on personal finance and credit research to assist consumers. Previously, Joe specialized on public sector and infrastructure financing at Goldman Sachs. He graduated from the University of Texas at Austin with a BBA in Finance.

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Brex's business model is simple: Provide credit cards for startups. It exceeds its mission by offering relevant benefits like access to the Visa network, expense management tools, higher credit limits and security fraud protection.
startup, landscape, corporate, cards
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2018-19-15
Monday, 15 October 2018 09:19 AM
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