Why Funding Small Business Is Really a Global Challenge 

Small businesses are a major contributor to the world’s economy, but too many still struggle to access working capital. 

Historically, the world’s financial systems haven’t been designed to meet the needs of small and midsize businesses, but there is growing interest among political and financial leaders in increasing these companies’ access to working capital, said Alexander “Sandy” Kemper, C2FO’s founder and CEO.

Kemper was recently a featured guest and speaker at the Global SME Finance Forum presented by the International Finance Corporation in Mumbai, India. 

As part of the event, Kemper was interviewed by Hans Koning, global chief industry specialist in digital finance at the IFC’s World Bank Group. They spoke about making capital more easily and equitably available to small businesses around the world. What follows are excerpts from Kemper’s comments. 

Digitalisation is creating a new path to bring capital to under-resourced companies

“It’s one of the ways that we can help SMEs (small and medium enterprises). The infrastructure that’s been built in the past was not geared toward nor cost-effective for small business acquisition as a financing entity.

“So I think as we create more digitisation, more transparency of data, it’s only natural that more capital will flow to small businesses because that’s been an opaque market. … And if we bring more clarity and more transparency and more opportunity at a lower cost of acquisition through digital platforms, you’re going to see more financial institutions being able to provide capital with — your help and our help — to those businesses. 

“And as you point out, 65% of the world’s GDP and employment is small business, and if we’re not serving them, how do we expect the globe, the world, to be a better place?”

India is making important strides in making capital available to small and midsize businesses

“In many ways, India has led the market in UPI (Unified Payments Interface); account aggregation; open and transparent platforms; and TReDS (trade receivables discounting system), which is a fantastic working capital platform, which we’re honoured to be part of. I think, in many ways, they’re setting the stage and setting the tone for what other nations can do.

“For every $1 million you put into the hands of a small business that would otherwise not have it — so another million of financing, another million of early payment — 16.3 jobs are created. India has to create 100 million jobs by 2030. And there’s no way they’re going to do that if they can’t free up capital for the small businesses who are the No. 1 employer of people in the economy of India.”

Small businesses aren’t a niche customer — they’re a worldwide force

“Some people think small business is niche, but we just discussed that it’s more than half of the world’s economy. We did some work with the Federal Reserve and the US Treasury a few years ago during the pandemic, and during this analysis, we realised that women-owned businesses, minority-owned businesses — diverse businesses — used our platform two to three times more than their majority male peer group.

“And why was that? I think it’s because, and I don’t mean to be so blunt about this, but I guess I will. Financial institutions want to do the right thing, but financial systems are reflective of the prejudice and bias that exist in society. So as long as we have bias in society, we’re going to see that reflected in the financial system.”

Small businesses need a better solution for accessing funding

“We’re doing that by just giving them the capacity to be paid early on their accounts receivable. With one click, they’re able to accelerate payment. There is no underwriting. We’ve done $300 billion of funding in the last 10 years — almost $100 billion this last year. We’re growing nicely, and we’ve never had a credit loss because there’s no credit involved.”

To learn more about C2FO’s Early Pay solution, click here.