SMBs Seek Credit Solutions Beyond Business Owner’s Personal Credit Card

In countries like Canada that have a very developed financial system, it’s easy to expect that there would be a high level of financial inclusion. There is, for the most part, but some market segments are still underserved.

“One of them, we believe, is small and medium enterprises [SMEs],” Sabrina Pilbauer, chief financial officer at CAARY Capital, told PYMNTS.

She said it is difficult for SMBs to get access to credit because they often don’t have a credit history or don’t meet other criteria.

“About 40% of applications from small and medium enterprises in Canada for credit are being rejected,” Pilbauer said. As a result, she said, business owners end up using a personal credit card, which creates a lot of expense reconciliation and takes on risks that the business should not carry.

“That’s the big thing that we see right now,” Pilbauer said. “What we see also is that there are many tools right now. Technology has evolved significantly, and we can overcome some of those hurdles by leveraging technology to look at those small and medium enterprises differently — and that’s what we do.”

Leveraging Technology and Different Adjudication Processes

CAARY Capital is a Canadian FinTech platform that plans to soon offer accessible credit cards, capital and financial products for SMBs. The product is now in beta testing and the company expects to launch it in the next few weeks, Pilbauer said Friday (Jan. 7).

“We are leveraging technology, different adjudication processes, and we also provide some really good finance tools to SMEs to manage their expenses, doing accounting, reconciliation, expense management — all that kind of thing,” Pilbauer said.

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SMBs that have been declined credit may prove creditworthy when judged by other criteria, she said. CAARY Capital will look at the company’s cash flow, assets and accounting ledgers to make that determination. What’s more, it will leverage open banking tools to monitor them and make sure its risk profile is not changing. If there’s seasonality in the cash flow, CAARY Credit can offer a different product.

“We’re trying to build that relationship and be behind those SMEs in a very different way, leveraging technology, leveraging open banking tools,” Pilbauer said. “That’s something that today no one else does in Canada.”

Building a Full Platform That Includes Spend Management

To help SMBs better manage their expenses, the company will allow them to control spending on different cards, limit spending on certain ones for specific items or types of purchases or spread the limits differently.

“We are always on the hunt to look for new tools that can be useful for our customers as well,” Pilbauer said. “So we’re really building a full platform.”

CAARY Capital is using the beta product, along with friends’ and families’ companies. Many of the people at CAARY have an entrepreneurial background like that of the product’s intended customers.

“We’re in it to make a difference,” Pilbauer said. “The people at CAARY are coming from different backgrounds, but many come from small and medium businesses, have run small and medium businesses, so understand the reality of not having access to credit when you need it — and for some reasons that sometimes are not always easy for small and medium businesses to understand.”

See also: APOLLO, CAARY Partner On SMB Digital Insurance