Quick.me and the fundamentals of ethical SME lending
While some of the entrepreneurs we talk to at PYMNTS seem like they were almost born to solve the problem that they founded a business to support, there are also those who have taken a slightly more roundabout path.
Take the team at Quick.Me, a company that, in its current incarnation, provides working capital to small businesses through SaaS and POS platforms. But that, according to founder and CEO Ola Okeshola, is very different from where the company started.
“We didn’t start out like most lending platforms. We like to say that we didn’t choose this path; this idea chose us.
Quick.me began as a marketplace to make it easier for consumers to book and pay for services provided by small businesses. And, in its early days, as it acquired these SMB partners, executives kept hearing a recurring complaint. This complaint was about the need to have access to capital to grow and manage their businesses. Instead of making it easier for SMBs to acquire customers, Okeshola and his team decided to make it easier for SMBs to acquire working capital quickly.
“We were trying to solve a simple inefficiency in the [SMB] space – most of which were caused by mass cash flow. Our app allowed businesses to schedule payments. Then we understood: since we have access to all payment transactions, instead of accelerating their payment, why not facilitate their access to a working capital line via a merchant cash advance product? »
This product worked well, but there was a “but”, and a pretty big one to that. Okeshola noted that acquiring these SMB customers was expensive, a cost that didn’t seem reasonable to bear in an environment full of SaaS companies and point-of-sale providers who had already done a great job of only aggregating the types of small and new businesses that Quick.me could service with its lending platform.
The path chosen was to partner with these companies so that they could help their clients access working capital.
With a twist.
A different perspective on loans
A merchant cash advance (MCA) specifically refers to a lump sum cash loan given to a business in exchange for a percentage of its daily credit card receipts. Their size ranges from $10,000 to $1 million, depending on the size and volume of the business. These loans offer working capital relief, but can be quite expensive for traders with interest rates between 8-30%.
But Quick.me, Okeshola noted, works differently.
He and his team don’t think it’s fair to penalize SMEs for running into cash flow problems. Running out of funds while waiting for receivables to be paid and smoothing out revenue during seasonal ups and downs is something that happens even to well-run businesses.
“We fundamentally believe that any of us could have bad luck tomorrow, and we always take that into account when we loan out,” Okeshola said.
It’s an empathetic approach, he says, but also a rational one. Tasting businesses that need a short-term cash injection is not good business, because a business that is crushed by crippling loan payments and goes bankrupt is also a business that can never work again. with Quick.me.
Moreover, he noted, whatever one tends to hear that incredibly high rates are absolutely necessary to defer risk, that doesn’t have to be the case.
“We believe that bad money drives out good money, so we work with POS providers who have a history of transactions that we can see,” Okeshola said, adding that through these partnerships they use data to determine a well-reasoned approach. to provide liquidity to SMEs in need.
He also believes that a large majority of high-priced loans stem from a lack of knowledge. If a new business asks someone they don’t know to lend them $5,000, the natural tendency is to say no or charge a very high interest rate on the funds to reduce the risk of the decision. Okeshola, through Quick.me, wants to find out which businesses it can raise capital for, and then tailor the products it can offer to that real need.
Avoiding the siren song of “disrupting the banks”
Much of what Quick.me is able to do, and intends to do in the future, is based on what Okeshola calls a fundamental understanding of the fundamentals.
“There’s this unhealthy, compulsive obsession with disrupting banks,” he said. “And people are just pouring money into things where the economy may not be favorable. The reality is that to really disrupt banks, you have to have a sustainable competitive advantage through the network of the value chain. Most startups don’t really have that.
Banks are so incredibly competitive and powerful today, he explained, because they have a “really, really, really low cost of capital.”
“There’s no way to beat a zero cost of capital as an advantage that technology in itself can provide,” Okeshola said, pointing out that banks can acquire the same type of technological innovation as these disruptors. startup deploy.
This means that the Quick.me team doesn’t wake up every day wondering, “How are we going to disrupt the banks today?” because this question will not help them run their business better.
They are more concerned with their fundamentals: what their SME customers need; how they can provide it and how they can do all of this while adhering to their high ethical ideals around using credit, lending and smart decision making as tools to help small businesses and using channels that are already reaching these companies to reach them.
It’s a lot of work, and Quick.me continues to perfect this beta offering and simultaneously works to establish an international presence for the company.
But, noted Okeshola, it’s worth it because before they started life as a lending platform, they were told by their customers that it was something they really needed.