Growing from Fintech to Thriver to Banks

by Adrian Davis / February 7, 2023

Welcome to Thriver’s short reads about investing in SME debt and how the SME debt market works. You’ll read them faster than you finish your cup of coffee.

Small business and family enterprises or SMEs represent $400 billion in debt, growing at 6% a year. There are 170,000 SMEs with revenue of at least $2 million that need money to grow

SME funding needs and options change as they grow. We call the progression ‘Fintech to Thriver to Banks’.

Newer SMEs’ funding needs can be sporadic and short term. They can be reliant on a major customer, where a delay in payment can lead to a short-term funding shortfall. The SME knows the client will pay but they’ve missed the customer payrun. An SME might go to a fintech or private lender to cover a shortfall of $10,000-$25,000. It’s expensive, but it’s only for a few weeks at a time, so it’s an enticing solution.

However, as the business grows, SMEs find themselves going back to the lender more frequently and for larger amounts, up to $200,000. At that stage , the ever-increasing amount of fintech or private lender debt can start to get so expensive that it affects the SME’s profitability.

Alternatively, the SME business owner may have scraped by, avoiding the fintech and private lender market. However, they have reached the point that they can no longer use their own reserves to fund growth. SMEs like that:

  • are through the start-up phase and are becoming established businesses
  • are succeeding in winning new business, often from bigger customers than before
  • don’t have the cash flow to take on that new business.

They often need more money ($250,000 and up) and may have limited appetite for a fintech’s pricing model. Yet they are still too small for banks to commit time and resources to understanding their needs. Even if a bank is eager to deal with the SME, a lengthy credit approval and onboarding process might mean the SME misses the opportunity.

This is Thriver’s space.

We provide innovative, well-thought-out solutions with quick turnaround for funding needs of $250,000 to $1 million. We provide the funding support growing SMEs need at a price that won’t cripple their businesses. We understand the changing requirements of SMEs and work quickly to get funding in place.

SMEs of this type are real businesses. They have growing revenue and they are profitable. They are owned and run by smart, serious, committed businesspeople. These owners understand they need external money to get access to growth opportunities.

Thriver limits its facilities to $1 million because that’s the natural progression point. The point at which banks should be getting interested. A $1 million facility is big enough for the bank to present a solution and get its wheels in motion. But because an SME has Thriver in place, they can afford to work to the bank’s timetable. Eventually, the bank’s process will come to an end. When it does, the SME will lower its funding costs again and can grow with the bank well past $1 million.

Next time, we’ll look at how SME owners view debt.

by Adrian Davis / February 7, 2023