Biz2Credit: A boon for Small Business
Date: Thursday , May 01, 2008
An entrepreneur owns and operates an IT staffing company that was just awarded a large contract from a Fortune 500 company. Smooth and successful job execution could do wonders for the company’s pipeline growth. The owner needs to move fast to add employees and service the contract immediately. But there’s one hurdle – The Company won’t receive payment for the project for 45 to 60 days.
In need of $300,000 to complete the job, the owner approached Biz2Credit, an online small business marketplace for help. Based on the short-term needs and the past personal and business financial statements, Biz2Credit advisors suggested taking a line of credit against the business’s accounts receivables and providing the lender with an accounts receivables aging statement to avoid cross-corporate guarantees.
After running a business credit check on the company and the company’s clients, the lender funds the line of credit at a low interest rate. The deal was closed within 10 days, at no closing cost and no fixed-term.
Founded in 2006 by Rohit Arora, Biz2Credit connects small and medium businesses (SMBs), with leading banks across the country. The marketplace provides multiple credit options for business owners to compare, review, and accept the best offer that suits their expansion or operational needs.
Arora conceptualized Biz2Credit two years ago working as a consultant for Deloitte’s strategy practice. While advising banks on how to penetrate the SMB market, Arora observed the profitability of SMB clientele in lenders’ portfolios. On average, SMBs as customers were three to four times more profitable than other customer segments, used financing four to five times a year and utilized other banking services two to three times a year.
Unfortunately, Arora also noticed that most banks failed to penetrate the market because of ineffective marketing and communication methods. As a result, SMBs struggled with limited access to credit and resources.
Arora began the offline project in November 2006, with an initial focus on the South Asian entrepreneurial community. By mid-2007, Biz2Credit developed the online platform and proprietary decision-making tool. The marketplace provides a platform for banks and lending institutions to reach out to SMBs, especially within the ethnic and minority communities, while simultaneously offering financial advisory services to these businesses.
The engine analyzes a business’s financial status and expansion plans and generates the top credit products in the market that the company qualifies for, a description of the product and the required documents. Recently, Biz2credit released a free-of-cost proprietary online document storing and sharing system to aid SMBs in their document management.
Biz2Credit has formed a network of business accountants, attorneys, and business brokers for small businesses owners to access. The fully functional platform was launched in late January 2008.
Since the launch, the company has incorporated new features in the engine. Biz2Credit is the only Web site in the United States with a consolidated database of participating state enterprise tax credit zones. A business owner can now check to see if his business is located within an enterprise zone and find the subsequent zone coordinator for that area.
“Last year we helped over 700 small business owners find financing solutions and built solid relationships with over 20 national banks across the country,” said Arora. “We’ve expanded into 15 states in the United States and we’re growing 30 percent per month.”
According to Arora, forming relationships with lenders was biggest hurdle in building the model “Banks were initially skeptical that we were brokers. So the challenge was to make them understand that we were not brokers and that were setting up a market place which will be mutually beneficial to them and small businesses in a very cost effective way,” explained Arora. “It was tough to make them understand that this would help them reach out to ethnic and minority markets.”
Arora found that banks spent over 7 to 9 percent of the profit generated from SMB clients on marketing efforts. After a few successful marketing pilots, Biz2Credit now accounts for 2 percent of banks overall marketing costs. Best of all, minority businesses that were hesitant to approach large institutions, now have direct and multiple channels to access credit.
More banks now approach Biz2Credit for insight on ethnic and minority market penetration and how to position products within these communities. The company offers multiple offline and online marketing avenues. Earlier this year, the company launched a quarterly newsletter that is circulated to over 25,000 businesses throughout the country.
Biz2Credit receives money from each transaction on the platform. Other revenue sources include product workshop advisory fees from lenders and content syndication of published studies and reports on SMB market behavior. The company has recently partnered with a leading data analytics firm to conduct business credit behavior studies. Also, in the next couple of months Biz2Credit will launch a small business exchange community where entrepreneurs can post and browse businesses for sale, business services and classified ads. Biz2Credit will charge users a small listing fee.
A recent survey by National Association of Women Business Owners (NAWBO) revealed credit access as the primary concern for SMBs. Biz2Credit has tied up with industry, women (including NAWBO), minority and media associations across the country to provide content on financing trends and advice through case studies, blogs and e-mail updates.
In the next couple of months, Biz2Credit will launch and expand the business exchange community globally. The company is in the process of formalizing partnerships with leading lending institutions and research facilities in India.
Today, in the thick of the credit crunch, Arora and his team of technology and finance experts have proved to be a boon for small business.