Podcast June 7, 2022

Changing the Credit Game for Small Businesses

Raise your hand if, as a small business owner, you’ve put company expenses on your personal credit card?

It happens to a lot of small business owners. They put up their own resources, money, and even credit scores for their small businesses. And for good reason: They want to see their businesses thrive and succeed, so they do what they think they have to do.

But what if there were another way?

What if, instead, small business owners weren’t shot down left and right whenever they apply for loans or lines of credit to get their businesses off the ground or keep them running?

Ken So saw a need, so he decided to do something about it, which is why he founded Tilful, a service dedicated to bringing financial inclusion to small businesses and helping them build and gain access to credit.

Join us as we discuss:

  • How Tilful aims to go beyond the top 5% of small businesses with great credit and help everybody
  • Why you should stop putting up your own assets to keep your small business going
  • The challenges facing small businesses when seeking access to meaningful credit

“The core of what we do is taking that open banking data from our users and to be able to understand in real time: what really matters from a decisioning standpoint.” — Ken So

Tilful’s drive to deliver accessible value

There’s no need to reinvent the wheel, right? Ken certainly believes this, which is why the Tilful data flywheel leverages historical data and processes. Working with data at scale, like when he did so for the formal banking sector, gave him an insight into what drives credit-related decisions, especially those made by small business owners.

By taking a data-first approach, Tilful has unlocked the power of building the right partnerships to offer the right products to the right people at the right time. It’s incredible, the way it works: now credit is within reach for more than just the top-tier businesses. It’s accessible to 95% of small businesses that are otherwise ignored or rejected by the legacy system of credit operations.

Why it really matters

We all know what kind of damage events like the COVID-19 pandemic had (and still have) on small business cash flows and operations. When there’s really no way out for small businesses, platforms like Tilful can save jobs and lives in the process. Accessing credit without the weight of bureaucracy can achieve that outcome in record time.

“If something happens, you don’t want that to hurt your personal credit score and personal credit” — Ken So

Stop risking your personal assets for your company’s success

At least four million businesses were formally started in 2020, alone. Ken talks about how, from that number, the majority of business decision-makers (usually founders and/or owners) place business expenses on their personal accounts and credit facilities.

His advice is to avoid this for two good reasons:

  • You’re placing your own financial solvency at risk by consuming more credit than is necessary for your personal needs.
  • Spending your own money doesn’t build your company’s credit score.

If something goes wrong within the business operation or the market, your credit score is at risk and that means your personal ability to access potentially life-saving financial products as well.

Having no credit record as a business entity also creates barriers for your business later on, when institutes like banks and insurers might want to examine your company’s credit history for underwriting purposes.

Because of these reasons, Tilful has launched meaningful products like their business credit card, which help small businesses build credit activity and scores earlier on in the business journey.

“Our goal is not to just be able to help the top 5% of our user base, but rather 95% of our user base, covering a much wider credit spectrum.” — Ken So

Small business challenges: from day one to credit access

Ken looks at it from the perspective of the business journey timeline.

First, you’ll need to register the business and open up a bank account for it. It sounds simple but not every startup founder understands the requirements to even fulfill them.

Once the bank account is open, there are transactions like payroll and utility payments that likely must be processed.

As you begin your operation and get into a sales rhythm, you might need to build inventory, hire more people, and access other credit products like working capital loans.

Credit access challenges

Approval processes can be lengthy and intricate. There are a lot of hoops through which a small business must jump. Thankfully Tilful’s business credit card product helps build up data like credit history, and that means getting pre-approval through their partner network can be expedited.

It all comes down to this: small businesses need access to funds quickly, with as little bureaucracy as possible. The approval timeline can be the difference between life and death for small businesses. Often-overlooked costs like interest rates, payment terms, and default penalties can also add up.

Every cent counts twice as much in a small business setting, which is why the pre-emptive approach that Tilful takes leaves a more sustainable positive impact.

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Until next time! 

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