This Maker Aggressively Expanded Her Business Without a Traditional Loan. Here's How.

The $510,000 Crista Freeman had raised from angel investors served her well: The money helped her Phin & Phebes artisanal ice cream reach stores around New York City. After four years, she was ready to expand -- but could barely afford to do it. Once she buys ingredients, it can take up to six months for her customers to finally pay her. "When the product gets manufactured," she says, "I'm burning through cash."

Chris DeLorenzo

Sure, she could have applied for a loan from a traditional online lender, but those credit lines average less than $250,000. She needed more. And she didn't have time to deal with securing a bank loan.

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That's where P2Binvestor helped. It's an online lender that puts a modern twist on "factoring," which we'll get into later. In this case, P2Binvestor gave Freeman a $500,000 credit line. With that money, heading into the spring, she could aggressively grow her business and not worry about cash flow. Here's the scoop on this service.

Who it's for

P2Binvestor offers a $250,000 to $10 million revolving line of credit to food manufacturers, wholesalers, fashion retailers, subscription software companies and other U.S. business-to-business startups. To be eligible, startups must be at least a year old and have at least $500,000 in annual revenue or $50,000 in monthly revenue. P2Binvestor will then look at collateral -- such as inventory, receivables and ongoing customer contracts -- to determine the size of the loan.

The idea is to make "getting $1 million as easy as getting $50,000," says Krista Morgan, P2Binvestor's cofounder and CEO. Since launching in 2014, the Denver-based lender has extended $300 million in credit to 82 companies. The average loan is $750,000.

How it works

A quick lesson on factoring, which has a history going back centuries. Traditionally, factoring isn't technically a loan; rather, a company in need of money (say, one that makes ice cream) sells its customers' orders (from the people who want ice cream) to a financial institution at a discount (say, 90 cents for every $1 worth of orders). That way, the ice cream company has the money to fulfill the orders, and the finance company is responsible for actually collecting on the invoices.

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P2Binvestor works in a similar way, in that it evaluates a company's invoices. But rather than buy up the orders, it extends lines of credit. P2Binvestor's annualized rates range from 12 to 18 percent, decreasing as a company becomes a safer credit risk. Borrowers sign a one-year agreement on the credit line, with no penalty for early repayment if the borrower opens a new credit line with a bank.

How it makes scale happen

Besides covering operating costs and payroll in a pinch, the credit line will help Phin & Phebes sell a projected $2 million worth of ice cream this year to more than 2,000 stores in the U.S. -- including Whole Foods, Safeway and Walmart. "We've been able to grow revenue this year by around 170 percent," Freeman says. Now, that's cool.