A recent PYMNTS report surveying more than 500 small businesses found that without financing, 1-in-5 SMBs feared they might not be able to survive the current wave of tariffs. Recent research from J.P. Morgan found that the average small business has less than a month of cash on hand. SMBs sit on a knife-edge and are disproportionately impacted by swings in the economy. Uncertainty seems to be the only constant in 2025, other than the resilience of business owners.
Small businesses could certainly use a little help today: costs are going up, supply chains are uncertain, consumer spending is pulling back, and margins are tight. We see it every day at Pipe—how much impact capital access can have for small businesses. But most banks just aren’t set up to help.
SMBs who end up on their doorstep face a bureaucratic marathon: multiple years of business tax returns, months of bank statements, a profit and loss analysis, detailed personal information, and credit scores.
Few businesses can clear this bar. And it pushes them towards undesirable outcomes when they need help the most. They might try to white-knuckle through the situation and get by without any help, get a payday loan or a high-cost merchant cash advance through an old-school ISO broker, or put expenses on their personal card.
Banks and small businesses simply have misaligned goals. They have a rigid way of assessing risk that doesn’t fit how small businesses operate. Capital and documentation requirements are particularly punitive for SMBs because the cost of servicing a small loan is as much as a large one for banks.
The takeaway isn’t that 40 percent of the economy is being set adrift. There are options for SMBs and new market forces at play that can help them rethink how they get access to capital. It’s just time SMBs set aside any notion that banks are their only, or even primary, source of financing.
Capital providers in 2025 can get inside the flow of your business’s data. Just not banks.
We’ve seen in recent years an explosion of vertical software-as-a-service offerings for small businesses tailored to the incredibly specific needs of different market sectors. For instance, Boulevard offers a platform specifically for salon owners, and Housecall Pro for contractors (and the list could go on for a while).
These companies are starting to build capital options into their products because of the live revenue and cash flow data they have for an individual business. This allows them to structure and offer capital in a way that a bank never could. Firstly, they can offer capital to a business within the same platform they use to manage their operations every day, making it quickly available to them.
While a lot of companies tout pre-qualified capital offers, there can be a huge drop-off after credit checks, with as many as 30 to 40% of pre-qualified merchants being disqualified. With the first-party transaction data from these vertical SaaS platforms, truly pre-approved offers are possible, with no personal or business credit checks needed, and close to 98% going through to final approval. And all underwriting can be individually personalized to the unique needs of each industry.
Look for credit options that match your capital needs
A minimum loan amount from a bank might be something in the order of $250,000. The bureaucracy around it is so onerous that it’s not a process you’re likely interested in doing twice. But this new model allows a software platform to advance a smaller amount to an SMB, for real, pressing, and immediate needs. They can draw down on it, easily make payments from future revenue, and access additional capital when needed. It’s a completely different ballgame than having to take all of your capital in a big lump sum (if you’re lucky) and start paying interest on the full amount from day one.
Transparent pricing and flexible payments, not compounding interest
This new model of capital, and the personalization it opens up, allows the cost of capital to be priced in a completely new way. A small business borrowing money from a bank pays back the loan in fixed monthly payments. And those payments don’t reflect at all the seasonality and unpredictable fluctuations that can hit a small business. Businesses are on the hook to pay the same monthly payment each month, no matter what their revenue looks like. They end up defaulting if they can’t make the payment.
Because this new model of capital isn’t a loan, there’s no interest. There’s a one-time flat fee, which gives an SMB complete transparency into how much they’ll pay. The capital is paid through a set hold rate, so the payment amount fluctuates in response to changes in revenue. If the business unfortunately sees a 50% drop in revenue, then they will fortunately only have to pay 50% of the expected payment. There is a built-in relief with this new model.
It’s all part of a larger shift in how capital can be provided, where software platforms open up live revenue data to new underwriting models, enabling fairer access to capital for SMBs. It not only reduces risk but democratizes access to credit, providing a lifeline to the small and mid-sized businesses that are not being served today by banks. Because, with everything happening, they could really use the help.
Luke Voiles is the CEO of Pipe.
Photo courtesy Planet Volumes for Unsplash+
