The American economy thrives on the entrepreneurial spirit that fuels the birth of approximately 600,000 businesses each year, as per data from the Small Business Administration (SBA). Historically, Small and Medium Businesses (SMBs) have served as the backbone of entrepreneurship, acting as essential drivers of economic growth and job creation. Representing roughly 99.9% of all U.S. businesses, SMBs employ almost half of the nation's workforce. Despite their crucial economic role, SMBs - particularly the younger ones - frequently encounter difficulty accessing credit, which leaves them underserved and potentially susceptible to economic instability.
Recessions often stimulate the birth of successful small businesses, as economic downturns force entrepreneurs to innovate and discover novel solutions to problems. Yet, for young businesses aspiring to replicate these success stories, securing credit can pose a significant obstacle. Their limited business credit history often necessitates the mingling of personal and business finances, complicating the process of building credit. Research by the National Federation of Independent Business (NFIB) suggests that 45% of these businesses persist in using personal credit cards for business purposes. This fusion of personal and business finances further complicates the assessment of these younger businesses for credit. Regrettably, a significant portion of young businesses shut down due to funding difficulties. Though the exact number fluctuates, estimates suggest that up to 30% of small businesses fail due to insufficient cash flow.
Anchit Singh, an expert in SMB financing leading product & credit strategy at Fundbox, highlighted this issue by stating, "Young businesses are the future of our economy, yet the current system frequently overlooks them. The industry must democratize access to credit. AI algorithms should utilize both traditional data sources like credit bureau data, and non-traditional sources like bank transaction data, payments platforms, and accounting platforms to better understand our customers' needs and provide credit solutions that truly support their growth."
Fundbox employs advanced AI algorithms to tackle these challenges with a unique solution. Its proprietary platform uses data science to automate underwriting and risk assessment, facilitating quick and easy credit access for SMBs. Anchit added, "At Fundbox, we are committed to supporting these businesses by providing them with the credit they need to grow and prosper." Fundbox's working capital product not only assists businesses in acquiring credit, but also provides continuous assessment, in order to offer better terms to grow alongside their customers. Since its founding in 2014, Fundbox has furnished over $3 billion in funding to more than 100,000 businesses. The platform has enabled these businesses not just to survive, but to thrive, thereby contributing to economic growth.
The provision of credit to young businesses is not merely important, but it's crucial for fostering economic growth. Innovative solutions, such as those provided by Fundbox, can ensure these businesses can not only survive an economic downturn but position themselves for growth when the time is right.
