US Bank Says Credit Products Win by Rewarding Small Businesses for Their Spend

The right borrowing tools can have a big impact on small businesses’ future growth prospects.

That’s because small and medium-sized businesses (SMBs) commonly face a number of challenges related to their cash availability, including limited capital, seasonal fluctuations and the need for expansion or investment in new opportunities.

And while revenue levels and generational outlooks play a significant role in how SMBs use borrowing tools, there are certain features and benefits that nearly all business owners are interested in.

“One thing that’s consistent is that credit cards with rewards are the most popular borrowing tool,” Beth Dumke, senior vice president and head of business card strategy at U.S. Bank, told PYMNTS.

“We know from working with our clients that small business credit cards are especially important for new business owners because it helps that business owner begin to establish credit for the business. Down the road, when they do need to apply for another borrowing tool, such as an equipment loan, a real estate loan, now they actually have a credit history for their business,” Dumke said.

SMBs frequently tap small business credit cards to assist in making time-sensitive purchases and managing cash flow during the early stages of a business — and given how often these businesses tend to use these credit cards, they are increasingly looking for card products that offer rewards to go along with their spend.

“The financial consideration is one of their priorities, and it makes sense they want a card with either points or cash back,” Dumke said.

After all, rewards can be redeemed for cash back, travel or other business-related expenses, reducing the overall cost of operations.

Small Business Owners Prefer Flexible Solutions That Benefit Them

Small business credit cards with attractive rewards can be a valuable tool for attracting and retaining customers. Offering rewards for business expenses can differentiate a credit card and make it more appealing to entrepreneurs.

But, as Dumke noted, rewards are just one piece of the broader SMB borrowing puzzle.

With millennials and Generation Xers having grown up in a digital environment, providing a best-in-class digital experience is also crucial in meeting the expectations of younger business owners.

“When we are talking about these generations, they have the expectation that the tools they’re using, including financing, be instantly available to them on whatever device they choose to use,” Dumke said.

“Business owners need unique tools and capabilities to manage their finances and run their business. And if we can make it easier for them to do that, then that gives them more time to spend with their customers,” Dumke said of U.S. Bank’s own approach, adding that the bank aims to differentiate its digital experience for small business owners from those designed to meet the needs of everyday consumers.

By understanding the unique needs of small business customers and tailoring card value propositions accordingly, U.S. Bank is able to position and offer products that provide flexibility to small business owners, such as the Altitude Connect card designed for frequent travelers, offering more points for travel-related expenses, and the Altitude Power card, which provides two times rewards on every purchase and two-and-a-half times rewards for mobile wallet spend.

Get the research: SMB Borrowing Dynamics Tools, Trends and Decision Drivers

Opportunities for Growth Within the SMB Borrowing Space

Given the complex patterns of SMB borrowing preferences, “some businesses want more of a straightforward value proposition, something that’s easy to understand,” Dumke said.

She said she sees opportunities for growth in the small business market, particularly in the utilization of “buy now, pay later” options. For example, small business owners can utilize U.S. Bank’s ExtendPay for large purchases. This financing tool allow business owners to manage expenses by spreading out payments while still earning rewards on their credit cards.

“Buy now, pay later financing options help give business owners more control over their cash flow and, and help them have confidence in making larger purchases,” Dumke said. “When you think about how you can have additional solutions on top of the credit card, that’s one that provides a ton of benefit, whether you’re doing it after the purchase like [U.S. Bank does] with our ExtendPay solution, or if you’re doing at the time of purchase with a merchant.”

As for what the future of SMB borrowing holds?

Dumke said that advancements in technology, increased competition and changing customer preferences will shape the future of cards and rewards programs.

Furthermore, she said she expects cards to displace more expensive forms of payment, such as paper checks, and foresees continuous innovation within the industry to meet evolving customer preferences by offering enhanced data capabilities with valuable, personalized-to-the-business insights that are easy to consume.