In the modern economy, small businesses need to stay ahead of the curve if they want to stay ahead of the competition. Technology is constantly creating new opportunities for businesses of all sizes to grow in size and profitability, and those who don’t take advantage of these new technologies risk being left behind.
Fintech is one of the most exciting and rapidly-growing areas of technology, and it offers a wealth of opportunities for small businesses. From new ways to accept payments to innovative financing and ways to make claims to governmental programs and refunds. As of 2022, the fintech space is worth $179 billion, and there are about 30,000 fintech startups. Fintech is helping small businesses level the playing field, giving every company access to tools that have historically only been accessible to large corporations. With finance automation, data analysis, and more flexible financing options, small businesses now have the opportunity to grow and scale their companies to new heights.
Let’s take a look at the challenges that small businesses face today and how fintech can help overcome them. Then, let’s explore some of the smartest ways that businesses can start tapping into these new technologies. If you’re a small business owner, read on to find out how emerging and established fintech products can help you take your business to the next level.
The challenges small businesses face today.
One of the biggest challenges small businesses face is access to capital. To grow, scale, or even create a financial buffer, businesses need access to funding. That can be difficult for smaller businesses to obtain on their own. According to a U.S. Bank study, 82% of business owners said cash flow problems played a role in their company’s downfall. Especially if business owners haven’t stashed away money for emergencies, they could find themselves in a dire financial situation. In June 2022, the personal saving rate in the United States was only 5.1%. This is a considerable decrease compared to 10.5% in July 2021.
Another challenge that small businesses face is attracting and retaining customers. It’s a crowded marketplace. With so many choices out there, it can be difficult for small businesses to stand out from the crowd. Some companies may choose to invest in marketing like social media ads and paid search advertising, but not all of them have the capital available for these initiatives. As the saying goes, you have to spend money to make money. However, especially after COVID-19 and economic hardship, many small businesses do not have the same cash flow as they did a few years ago. This can add additional stress to companies that are struggling to stay above water.
An additional challenge: burnout. According to MetLife’s Employee Benefit Trends Study 2022, many workers feel worse than they did in 2021. The causes include malaise, depression, and overall stress. Pair this with inflation, rising costs, and an ongoing pandemic, and you have a recipe for many small business owners collapsing under conditions no one was prepared for.
How fintech helps small businesses win.
Why is fintech such an effective tool for small and mid-sized businesses? The main reason is that it can help them save time and money. What business wouldn’t want that? By adopting technology like mobile payment apps, businesses can start moving quicker and more efficiently. Many businesses have begun using cloud-based applications that reduce the need for on-site hardware and software, streamlining processes across the board.
In addition, fintech can help businesses reach new customers and markets. With tools like customer loyalty programs and digital or social media marketing, businesses can create connections, loyalty, and a buzz around their products or services. Additionally, fintech tools and solutions can help companies get exclusive access to their customers. From intuitive software to sophisticated user experiences, the possibilities are enormous.
There are also several online lending platforms that can provide access to finance for businesses that may not be able to get funding from traditional sources such as banks. As an example, a new wave of fintech-powered mortgage companies offer personalized loans at scale, helping to replace the cookie-cutter agreements from the past. By automating payments, scheduling, and notifications, it’s now easier than ever for appraisers to run their businesses. With simplified workflows, fintech companies have streamlined communications between mortgage lenders and their vendors. By eliminating manual, time-consuming systems, the overall process is less of a headache and more efficient for all parties involved.
Another avenue for businesses to access more capital is to partner with a fintech company that specializes in claiming credits and refunds that may require specialized experience to acquire. There are several potentially lucrative avenues for businesses to claim refunds like the Employee Retention Credit (ERC), which can net SMBs up to $26,000 per employee their business kept on payroll during the pandemic. By filing a claim, business owners can gain back the money they lost during the pandemic and regain their financial footing.
The process may be complicated for the average business owner to take on themselves, or even with a CPA. A trusted fintech company can help business owners through the process to make it as painless, and beneficial, as possible. Of course, not all businesses will need nor want to use every fintech service available. But with such a wide range of products and services now available, there’s sure to be something that can help your business compete in today’s economy.