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Bryan E. Kuhn
Counselor at Law, P.C.
Business & Employment Law Attorney

Clearbanc expands financing options for e-commerce startups

Many entrepreneurs in Colorado pursue business ideas related to e-commerce. A new company called Clearbanc has developed a financing model specifically for e-commerce startups that differs from venture capital. The company provides money to qualifying applicants to support online marketing efforts that drive sales. Instead of requiring an equity stake in a developing company, Clearbanc collects fees starting at 5 percent of top-line monthly revenues until the lender recovers the cash advance.

In addition to the 5 percent fee, Clearbanc could add more fees between 6 percent and 12.5 percent based on how an e-commerce startup spends the money. Advertising purchased from Google, Facebook, Twitter, Amazon or Pinterest with the cash advance would require a 6 percent fee. Money spent on other things related to marketing, like new computers, could incur a 12.5 percent fee.

Although some of the fees are higher than the cost of financing with a Small Business Administration loan, the cash advances might be easier to get if a business can show at least six months of consistent online sales. Clearbanc provides initial funding decisions in as little as 20 minutes and then spends just another week performing due diligence before issuing funds. The model represents an efficient means for some entrepreneurs to fund online marketing without needing to spend time courting venture capitalists and signing away shares of a company.

Before a person enters into an agreement that could impose thousands or even millions of dollars in liability, legal advice could be appropriate. An attorney may analyze the contract terms for proposed business transactions and explain the person’s obligations, rights and liabilities. Legal guidance might also help a person understand vital issues when developing an agreement with a partner or investor. If a dispute arises, then an attorney may evaluate the person’s position and recommend how to approach litigation.

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