Many small- and medium-sized businesses (SMBs) throughout the country are at serious risk of being run out of business. Cash flow disruptions, lack of working capital and supply chain shortages have been exacerbated due to the nation’s steep, 40-year high inflation rate, currently at 7.9%. As SMBs fight to maintain their cash flow and secure working capital to finance their daily operations, a new financing product from payments automation company Plastiq aims to help small businesses survive and surmount vaulting inflation rates.
Plastiq, a fintech serving SMBs for the past ten years, announced Tuesday that it has launched Plastiq Pay, which provides small businesses with the resources they need to improve their cash flow as high inflation rates threaten their businesses. Plastiq Pay gives SMBs the ability to thrive in a highly evolving economic landscape by automating every aspect of invoice receipt, payment approval routing, submission and bill reconciliation, according to the company’s announcement.
“We’ve designed Plastiq Pay to help a small business owner organize the back office before digitizing their business, to support remote work and to unlock and operate different forms of working capital that businesses have at their disposal,” says Stoyan Kenderov, chief operating officer at Plastiq in an interview with ZDNet. “And if they don’t have working capital at their disposal, we offer a spot credit to help,” he added.
How it works
Plastiq was formed a decade earlier to help SMBs secure working capital from available credit, usually in the form of a credit card. Before then, if you operated a small manufacturing business and wanted to purchase raw materials from a supplier outside the US, the supplier wouldn’t accept your card; cash or wire transfers were the only accepted payment method. And if you had a client waiting for you to produce a product, but you couldn’t buy the supplies, your client would take their business elsewhere.
Plastiq made it possible for businesses to pay suppliers by any method they chose regardless of acceptance so that businesses could run without interruption.
Today’s new product, Plastiq Pay, helps SMBs unlock their funds from existing credit cards and short-term financing options to balance cash flow.
“We’ve been gathering insights about inflation, and the strain that inflation has put is so multifold that it’s like a systemic disease,” says Kenderov, who adds that small businesses can’t merely raise prices to combat inflation because customers aren’t necessarily going to purchase their higher-priced products. In turn, the small business can’t pay its vendor’s higher prices, which means no inventory and no ability to produce more goods. “All of a sudden, inflation causes labor shortages, and that distorts the balance of power more to suppliers,” he says.
In addition to providing such back-office services as invoice and bill creation, team workflows (support for bill routing, approvals and compliance), and the syncing of data and reconciling transactions paid in Plastiq, the new Plastiq Pay offers short-term financing options. Now, Plastiq can instantly extend funding options, especially when cash and credit are tight.
In addition to being able to pay vendors by credit card, businesses can get an instant financing decision for their vendor payment, enabling them to extend the term of payment without the complications associated with a bank loan. To further facilitate such transactions, Plastiq Pay offers a mobile app in which users can manage their payments from anywhere. What’s more, it offers a cash flow dashboard in which users can see all card and bank account balances at a glance, according to the company announcement.
Kenderov notes that Plastiq has three main goals in the coming year. The first to help businesses digitize and rely less on paper transactions. Second, it wants to help American businesses level the playing field when it comes to working capital; a business doesn’t need to be a large corporation with lots of support from big banks in order to receive working capital. “We’re going to be adding more credit options and more ways for you to leverage available cash in any form of credit — credit cards, loans, line of credit, spot loans — or a combination of those to run your business,” he said. And third, Plastiq wants business owners to collect faster. “We know that 85% of B2B commerce doesn’t happen on credit cards usually because of the fee. We’re solving that problem by saying to American businesses that you can accept credit cards, too. Make it a choice of the customer. If the customer chooses to pay with a credit card, they’ll pay the fee,” Kenderov says. Plastiq’s fee for paying with a credit card is 2.85%, he said.
What’s more, Plastiq is working with enterprises with other software vendors that want to offer their payment experiences. As a result, Plastiq is giving those providers a set of application programming interfaces (APIs) that does everything Plastiq does so that those vendors can build their own experiences, Kenderov says.