Cash flow is a never-ending struggle for many small businesses. When they need a bridge loan to cover expenses, lenders are too slow to respond. Without outside funding, businesses run on the edge or delay major investments in operational improvements. Maybe, it’s time to look outside the box and give fintech a try. Their business model aligns with small business needs, making cash available as quickly as possible. Their innovative financial products are designed to meet the unique needs of SMEs.
Fintech services can be divided into the following:
- Bank and Payments
- Financial Management
Each of these areas saw an uptick in usage by SMEs over the last twelve months, in part, because of changes in how businesses were able to operate.
Banking and Payments
Many SMEs pay third-party suppliers by check. When mobility restrictions hit, they were unable to get to the office to print checks. As a result, they had to turn to online payment processors. Businesses would first open fintech accounts to be used for online payments. They would tie an existing account to the fintech account. Funds were then taken from the existing account and deposited in the fintech account at pre-set intervals to cover payments. Businesses set up payees and selected from a list of alerts and notifications to help monitor payment status. This process was much easier than traveling to a financial institution to set up online banking for a business.
Small businesses could even look at automated payments for payroll or tax payments. Once SMEs became familiar with the process, they learned how much time was consumed printing and mailing checks. Many moved to online invoicing, where invoices were sent and received in digitized form. Suddenly, accounting processes could be completed with the click of a button rather than the tedious process of manually filing each invoice.
Fintech companies can serve as a centralized repository for financial information. SMEs grant the fintech company access to their financial information in various financial institutions. Fintech takes that information and displays it through a dashboard so that SMEs can see their entire financial portfolio in one location.
The integrated financial picture helps SMEs by pulling loan data from multiple lenders or compiling account balances from different financial institutions. These applications can even pull data from accounting services to project cash flow based on invoicing. This picture makes it much easier for SMEs to manage the financial assets of their business. They no longer have to spend hours pulling together the information and creating a spreadsheet. Instead, they can access the app and have the latest data at their fingertips.
Some fintechs offer customizable dashboards that let the SME decide what information should be presented and in what format. One owner may like pie charts while another prefers trend lines. The flexibility in data presentation provides a more personalized experience.
SMEs are always looking for funding. Whether it is a line of credit to cover expenses when cash flow dips or a loan to purchase new equipment, SMEs need access to funds to grow their business. Fintechs provide a fast response to financing questions. SMEs can visit lending sites to see what financing options are available based upon their individual circumstances. In most cases, they can receive options in minutes. From there, SMEs can apply for financing with the click of a button.
Immediate approval makes fintech a more appealing choice for SMEs. Many companies run at the edge when it comes to cash flow. A slight bump in the road can have devastating consequences. Knowing that they have quick access to cash when they need it is a crucial factor for SMEs. They don’t always know 30 or 60 days in advance of their status, so the shortened approval process is a welcome change.
Of all the fintech services, insurance is the one SMEs may have tried — maybe not for the business, but for personal coverage. Like online lending, aggregate fintech sites pull information from multiple sources to provide a comparison view of available insurance policies and prices. With the limited time that every business owner has, the ability to see choices at one location beats having to call and possibly meet with multiple vendors to find the right policy.
Convenience and access are the foundation of fintech companies. Their business model delivers financial products and services not during “banking hours” but anytime and anywhere. They make it easy for SMEs to gain valuable insights into their financial position, and many offer expert advice to help SMEs achieve their goals. But, fintechs are not financial institutions and are not government-backed. That’s why it’s essential for business owners to understand the fintech market or speak with someone with a fintech certificate.