is considering an integrated financing opportunity


Small businesses, which collectively form the backbone of the US economy, continue to weather market volatility, many with declining odds of survival.

It is a sad scenario that justifies the existence of financial assistance initiatives in the private and public sectors, in particular the Paycheque Protection Program (PPP).

But according to CEO Evan SohnMany of these initiatives exist with businesses like restaurants and lounges in mind. Without a doubt, these small and medium-sized enterprises (SMEs) have been hit hard by the pandemic and the economic fallout, but they are not the only ones.

Speaking to PYMNTS in a recent interview, Sohn pointed out the recruiting industry – made up of tens of thousands of small independent recruiters – which faces unique cash flow challenges that are not necessarily mitigated by the traditional funding industry. or federal funding programs.

“The reality is that a recruiter is a small business,” he said, “with a fairly unequal income”.

In a recent initiative with an alternative lender, seeks to close this funding gap through a strategy that Sohn says showcases the value of integrated funding to target niches in the small business ecosystem that have it. most needed.

Recruitment cash pitfalls

Every small business is likely to face cash flow issues at some point in its existence, but some financial constraints can arise due to the uniqueness of one SME compared to another. Certain business models, seasonal operations and various other factors can all influence the financial well-being of a business.

The same is true for the recruiting industry, where smaller players are forced to bear the burden of late payments due to the industry’s payment models.

A common model, explained Sohn, is that a recruiter receives a percentage of the salary of the person placed for a job. Yet traditionally, an employer won’t actually pay the recruiter for a certain period, like 60 or 90 days, while they wait to make sure the talent is a good fit.

In another model, which is growing as the gig economy grows, recruiters will place emergency professionals with an employer, who then relies on the recruiter himself to compensate that worker. temporary. Yet the recruiter still waits 60 to 90 days to be paid by that employer for the services provided.

“I am guaranteed to cash in. However, I need a bank or a funder to help me fund this whole process,” Sohn said. “It’s a great opportunity for a lender to come and support this process. “

Traditional banks have historically been unable to meet this need, he noted, finding it too unprofitable to allocate resources to understand the nuances of this industry and finance small and single-operator businesses. Federal efforts like P3 loans, on the other hand, were designed for restaurants and lounges – small businesses with large numbers of employees and, therefore, high payroll volumes, while recruiting firms were not. necessarily the right solution, Sohn added. recently announced a Partnership with Fundomate to fill this gap. Thanks to this collaboration, Fundomate now has the potential to gain visibility among SMEs on the platform and to understand the financial flows to take out financing at competitive rates.

Integrated finance niche opportunity

Initially, this collaboration will see transfer the customer relationship to Fundomate via a link that will take a small business to a brand portal. But going forward, Sohn said he sees an opportunity to integrate the fundraising experience more seamlessly within itself.

This not only provides a more efficient and beneficial experience for the small business borrower, but, for Fundomate, there is an even greater opportunity to integrate data from to strengthen its underwriting process by having visibility into incoming payments from SMEs.

Integrated financing can also address specific market challenges in other areas. Sohn said is in talks with a buy now, pay later (BNPL) company to allow companies recruiting on the platform to access their own working capital tool by paying for recruiting services. in installments, while the recruiter himself is paid more quickly. .

As more markets and ecosystems consider the potential value of integrated financial services, it is not just the end-user experience that they are exploring. Sohn noted that these models are also increasingly beneficial to the financial service provider who facilitates services through these models, not only by strengthening their underwriting processes with integrated data, but by reducing their acquisition costs. clients.

“If I walk around with a community of over 800,000 small independent businesses, it’s a phenomenal lead-gen [lead-generation] service for a company like Fundomate, ”he said.

Historically, small businesses had been left out of the funding efforts of traditional lenders, leaving FinTech and alternative lending communities to meet the need with better banking, lending, payment, and other funding experiences. And as integrated finance reaches new markets, the opportunity to strengthen the end-user experience of small businesses continues to grow.

Yet there is seldom a one-size-fits-all solution to address the current SME working capital gap. With built-in financing now enabling non-financial businesses to meet these needs for their clients and users, the market has the opportunity to take a more focused and targeted approach to small business lending through features and functionality focused on specific sectors.

This is good news for the recruiting industry, says Sohn, who, as the concert market grows, will benefit from connecting talent and recruiters with banking services they have historically lacked.

“At the end of the day, these are small businesses,” he said. “While everyone in the capital city loves restaurants and lounges with cash advances, there hasn’t been a concerted effort to deliver a phenomenal offer to small freelance recruiters. “



About the study: U.S. consumers see cryptocurrency as more than just a store of value: 46 million plans say they plan to use it to make payments for everything from financial services to groceries. In the Cryptocurrency Payments Report, PYMNTS surveys 8,008 cryptocurrency users and non-users in the United States to examine how they plan to use crypto to make purchases, what crypto they plan to buy. ‘use – and how merchant acceptance can influence merchant choice and consumer spending.

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