During the pandemic, small businesses had to stretch cash flow like never before. Despite retail’s digital revolution in the last year, 85 percent of B-to-B suppliers do not accept credit cards at all – a huge obstacle for small businesses which on average have only 30 days of operating cash on hand at any given time.
And for many small businesses, access to credit when non-essential businesses were temporarily closed last spring meant the difference between reopening and a permanent shut down. Founded in response to a need in the industry to provide business owners with access to their earned credit to better manage cash flow and growth, Plastiq has helped millions of customers make billions of dollars in payments where credit cards are not accepted.
Led by Eliot Buchanan, the company’s Co-founder and Chief Executive Officer at Plastiq, the digital payment platform, was designed to help companies pay and get paid in a method that works best for them. Businesses are able to make payments on a card through the Plastiq app with payment sent to recipients by an ACH payment, check, or wire transfer.
Here, Buchanan talks to WWD Studios about the retailer’s growing need for credit options, limitations on small business owners, and how businesses can take control of cash flow.
Fairchild Media Group: From your perspective, how have you seen the needs of small business owners changing during the pandemic?
Eliot Buchanan: While we’ve never ever seen anything like COVID, the challenges faced by small businesses in the past year are familiar – access and time. Access to customers, access to talent, access to suppliers, access to cash and credit, and time to make sales and realize profits.
A third of small businesses in the country were made non-operational by the pandemic. Think of your favorite local stores and restaurants who’ve had to pivot to new ways of serving customers and needed time and cash to make transitions. On the other hand, online businesses are growing, and also need access to credit to expand inventories to meet the increased demand of quarantined customers shopping from home. And those shipments must arrive in time to increase sales.
In the past year, Plastiq, together with partners like Visa, have provided thousands of companies with immediate access to credit, and 30 to 60 days of interest-free time on their payables to help navigate some extraordinary circumstances.
FMG: To that end, what limitations are you seeing businesses and retailers struggle with now?
E.B.: One of the biggest challenges small business owners face is access to credit. Only a third of small business loan applications are approved, and approval rates are even lower if the business is owned by a woman or person of color.
Thus, most small businesses are financed by personal savings and then cash-supported through sales – making cash flow the most important ingredient in success.
We founded Plastiq to help by opening new financing options for businesses by enabling them to pay expenses with credit cards, which extends their payment cycles and helps preserve cash to address new opportunities. As one of our customers put it, “Despite having earned a great credit rating, I couldn’t get a small business loan, but I had credit cards, so I decided to lend myself my own money.”
FMG: What does having flexibility over cash flow allow a new, or small, business?
E.B.: The average small business in the U.S. only has 30 days of operating cash on hand at any given time, so controlling cash flow is a daily existential concern. And with the pandemic, days turned into months, so businesses need to stretch their cash like never before.
Our customers have many bills to pay every month. It’s everything from commercial leases, to professional services, to supplies and inventory for future sales. Plastiq enables our customers to schedule, pay, track and reconcile all of their bills in one place, with the flexibility to pay by credit card, ACH, or a wire transfer, so they have more control over their cash flow. And by choosing to pay expenses with a credit card, small businesses also can realize valuable rewards.
With access to credit and the flexibility to pay business expenses with credit cards, small businesses can build the cash reserves to realize new growth opportunities. For example, a company may need to hire freelance talent to scale design capacity or engage a marketing firm to develop a campaign for a new product, or pre-pay for expanded distribution.
We’re proud to serve many fashion retailers and ecommerce companies, and one particular use case we see in these sectors is the bundling of card and cash payments to increase purchasing power for inventory before key selling seasons.
FMG: Why is it important for businesses to have this control?
E.B.: Most entrepreneurs start businesses to ‘be their own boss,’ but independence comes with a certain amount of risk and uncertainty, and this has been no truer than in the past year. By providing access to the credit they’ve already earned, and visibility to see their payments in one place, and the flexibility to efficiently manage their cash flow, we can empower business owners to focus more time on the second biggest reason for starting a business — to ‘do what you love.’
FMG: In your own words, how does Plastiq’s technology enable a more organized financial platform, or “digital wallet”?
E.B.: One of the biggest pain points for small business owners is paying, tracking and reconciling their payables across checking accounts, credit card, and bank statements. It’s maddeningly inefficient.
Our goal is to provide small businesses with a one-stop-shop for all of their payments, to save time, money and provide peace-of-mind, with real-time notifications on their payment status. There are money management apps available for consumers. But we’ve purpose-built a payment platform specifically for the needs of small businesses with many bills, multiple payers within the company, and different recipients each month.
Plastiq is interoperable with Quickbooks Online, so your payments in Plastiq can be seamlessly incorporated into your accounting software making monthly reporting and quarterly tax preparation easier. And we’re excited to be partnered with Visa SavingsEdge, wherein Plastiq customers can register their Visa Business Card and save on their purchases.
For more information about Plastiq, visit: plastiq.com/visa-business-card