In an episode of PYMNTS’ new TV series focused on small and mid-sized businesses, leaders discuss why it can be difficult to secure working capital credit, and the risks of relying on other types of funding
Entrepreneurs and small business leaders are known for their passion. Tasia and Paul Ford, co-owners of Big Red’s Hot Sauce personify the drive and persistence it takes to launch and run a successful operation — but the path forward has not always been smooth, and there were times when their business would have benefited from more straightforward access to working capital credit.
Despite demonstrable demand for their product, at launch their loan application was denied; instead they relied on personal savings, absorbing the risk doing so entailed.
The Fords were joined on the program by Connie Evans, president and CEO of the Association for Enterprise Opportunity (AEO); and Bernardo Martinez, vice president of global merchant lending at PayPal. Karen Webster hosted.
“Banks don’t seem to think that a $250,000 loan or less is worth it to them,” Evans said, noting that most of the businesses she works with are seeking relatively small loans and failing to secure them is common. “It’s too costly, and these business owners don’t have the collateral and other kinds of documentation and assets that traditional financial institutions are seeking.”
“The reality is that capital access is roughly a $1 trillion dollar problem around the world,” Martinez agreed and detailed the other methods to evaluate creditworthiness he and his team use. He said many of the businesses seeking such loans are stable, but are looking to growth and might face cash flow gaps: “More than anything else, cash flow takes out these small businesses.”
“Planning takes patience and perseverance, and when you get [it right], you end up having a much better outcome,” Martinez said.
Watch the episode and read the corresponding article here: