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In September 2011, Ryan Gilbert testified before the US House of Representatives Financial Services Committee to discuss problems related to a consumer’s access to credit. When the large banking institutions were bailed out in 2008, he said, there was an oft-neglected side effect. “Those same banks that were ‘too big to fail’ are now too scared to serve their customers,” he said.

He was talking about the people trying to make ends meet: the sub-prime or near-prime customers who might look for a $1,000 loan rather than a $10,000 loan.

These are the customers Gilbert, founder and CEO of credit and lending startup BillFloat, is trying to help. Today the San Francisco-based company announced a Series C funding round of $21 million, led by Investor Growth Capitol, with participation from Venrock, FirstRound Capital, and Baseline Ventures. To date, the company has raised a total of $36.9 million.

BillFloat offers a flexible way for a customer to pay a bill, but with a fee. The twist is, the company doesn’t give the money directly to the customer; it just pays the bill right away. The circumstances differ from state to state. For example, a customer in Florida borrowing $120 would end up paying $136.94, according to the company’s website.

The company is also ramping up its MoreTime2Pay platform, which allows customers to access flexible payment options on mobile devices, on the website, and in stores. For example, one feature is a partnership with phone carriers T-Mobile and Metro PCS, in which BillFloat helps a customer buy a smartphone and pay for a prepaid plan. The catch for a prepaid plan, of course, is that the hardware comes at full price instead of being subsidized by the carrier. The plus side is that prepaid plans are more flexible than contracts, especially if income isn’t as stable you’d like.

That will be a big issue in about four months, when T-Mobile transitions to using only prepaid plans, ditching subsidized handsets. BillFloat lets the customer pay for the phone in a number of installments, and pay for the plan over a longer period of time.

The new infusion of cash will help to grow the team of 40 and hire 27 more people, mostly software engineers. The extra cash on the balance sheet will also help BillFloat look more stable to potential banking partners as the startup steers towards profitability. Right now, its partners include H&R Block Bank and Golden Pacific bank.

Gilbert says the company’s typical customer is a female head of household on a single income, earning about $45,000 a year. He says the company has noticed a hierarchy in typical bill payments habits. A customer’s cell phone, Internet, and cable bills are second only importance to rent. While BillFloat might not be able to help pay for lodgings, it is now $21 million more capable of at least being to help take the pain out of those bills.

[Image courtesy: Dave Dugdale]