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Comment by streetcat1 | Hacker News Reader

From what I understand, if you need credit as a founder, regular banks will want a personal guarantee, REGARDLESS of how much money you raised. I.e. the bank does not care about your company state.

Brex on the other hand looks at your company state.

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This is my understanding as well, but what I don't yet understand is why this would apparently work well for Brex but not for the banks. Part of me has wondered whether it's some kind of VC-subsidized strategy to make a risk play that doesn't pan out actuarially, sort of like what Uber does with fares. Can anyone explain this?

Brex minimizes their risk by offering a charge card versus a revolving line of credit. They also require access to your corporate bank account for liquid assets information to dynamically extend credit. This allows them to have a more nimble, forward looking-ish risk model rather than legacy institutions that rely primarily on credit histories.

This allows Brex to capture card transaction fees from financial services other banks ignore (again, due to risk models), such as startup charge cards.

> Brex minimizes their risk by offering a charge card versus a revolving line of credit. They also require access to your corporate bank account for liquid assets information to dynamically extend credit.

For how many businesses is "a charge card for 15% of your cash balance and you're responsible for fraud" substantively different from just using a debit card? (Genuine question -- this isn't a market I realized even exists.)

30-60 day float plus cash back rebates (1-7 points per dollar depending on spend category). Whether that provides you value is up to your business requirements and cash flow constraints. If you can’t get working capital otherwise (venture backed pre revenue), it’s probably not a bad deal.

I’d probably still go with Amex corporate cards and a personal guarantee, based on personal preference, a deep credit file, and a desire to outsource spend exception handling to the bank.

SVB, a popular bank for startups, started offering a card with no personal liability https://www.svb.com/business-banking/business-credit-card/sv... and Stripe’s card also has no personal liability https://stripe.com/corporate-card?utm_campaign=paid_brand-US...

I think the reason large banks haven’t offered this yet is they’re not very catered to startups, which might have a large balance but no credit history (either as a business, or because the founders are young or foreign).

(My company somewhat competes with Brex cash but doesn’t offer a charge card or credit card product)

I'm a co-founder of a 15-person startup. We switched our banking and credit cards from Chase to Brex about a year ago and it's just lot better - UX, fees, data, perks, etc.

I think what the parent is suggesting is, Brex seems to have practically no moat. If one day, say, Amex, which is already a huge issuer of business credit / charge cards, decides to eat Brex's dinner, can Brex survive?

For us, the consumers, do we care? If AMEX was gonna do this, they would have done it by now. If they buy/eat Brex, we still benefit from expanded financial instruments.

Amex actually did launch a startup targeted charge card that doesn’t require a personal guarantee, presumably to compete with Brex.

Brex’s gameplan though seems to be a full set of financial products targeted at startups that integrate well together, like per-employee charge cards, cash accounts, and revolving lines of credit. In that sense, they would start to look more like a streamlined and modernized (but riskier) SVB.