Facebook this week announced a $100 million commitment to a program that supports small businesses owned by women and minorities by buying up their outstanding invoices.
By buying up outstanding invoices, the Facebook Invoice Fast Track program puts money in the hands of small businesses that would have otherwise had to wait weeks if not months to get paid by their customers.
The program is the latest effort by Facebook to build its relationships and long-term loyalty among small businesses, many of whom rely on the social network to place ads targeted to niche demographics who may be interested in their services.
Businesses can submit outstanding invoices of a minimum of $1,000, and if accepted, Facebook will buy the invoice from the small business and pay them within a matter of days. The customers then pay Facebook the outstanding invoices at the same terms they had agreed to with the small business. For Facebook, which generated nearly $86 billion in revenue in 2020, waiting for payments is much less dire than it is for small businesses.
Facebook piloted a smaller version of the program in 2020 after hearing how much the company’s suppliers were struggling in the wake of the Covid-19 pandemic, said Rich Rao, Facebook’s vice president of small business.
“We just heard first-hand the financial hardships that these suppliers were facing, and it was created really quickly and brought up as an idea and pitched to our CFO to say, ‘Hey, would we be able to help our suppliers with this?'” Rao said. “It was a very small pilot, but we did see that be very successful.”
Now, Facebook is drastically expanding the program and will buy up to $100 million in outstanding invoices. Rao estimates this will support approximately 30,000 small businesses.
“It’s a new concept, but we’re really excited about it,” Rao said.
U.S. businesses owned by women and minorities, and that are members of supplier organizations that serve underrepresented groups, are eligible to apply for the program. This includes the National Minority Supplier Development Council, Women’s Business Enterprise National Council, National LGBT Chamber of Commerce, the National Veterans Business Development Council, Disability: IN and the U.S. Pan Asian American Chamber of Commerce. Facebook is also exploring adding more partner organizations for the program, the company told CNBC.
Among entrepreneurs who have already gone through the pilot of the program is Lisa Dunnigan, co-founder of the The Wright Stuff Chics, which sells merchandise for teachers and puts on the Teach Your Heart Out teachers conference.
After the pandemic forced Dunnigan to cancel all of her company’s in-person events in 2020, Dunnigan’s business announced a virtual version of their Teach Your Heart Out conference scheduled for July. Teachers registered for the conference in early 2021, but many paid with purchase orders that take “a very long time” to be paid out, Dunnigan said. After collecting the applications, Dunnigan submitted them to Facebook, and the company paid her more than $10,000 within a matter of days.
“This program has been a life saver for our company,” said Dunnigan, who was introduced to CNBC by Facebook.
Since then, Dunnigan said she has applied to the program again and have had Facebook pay their outstanding invoices multiple times.
Dunnigan’s story is among the many Facebook saw after the launch of their pilot that indicated to the company that this was something worth scaling up, Rao said.
“We were just overwhelmed by the stories that came back,” he said.
Interested businesses will be able to start applying on Oct. 1 after the program officially expands, Facebook said.