While many small business owners had hoped that the worst was over after these challenging last two years, it turns out that there is still one more obstacle they will need to face before the end of this pandemic: inflation. So, what can you do to prevent any further financial loss in the midst of increasing prices? In this episode, Gene Marks and Rohit Arora, CEO and co-founder of Biz2Credit, advise small business owners on how to offset the damage of rising interest rates and inflation.

Podcast Key Highlights

• How Are Inflation and Rising Interest Rates Impacting Small Business Owners?
  • Small business owners are worried that inflation will lead to higher interest rates on both existing and future loans.
  • They are also concerned about the shortage of people they can employ.
• What Are People’s Biggest Economic Concerns?
  • People believe that the Federal Reserve will be forced to increase interest rates even more. Although this rise would reduce inflation, it could potentially lead the economy into a recession.
  • There is significant concern that the current macroeconomic crisis, the unstable geopolitical situation, and the ongoing health crisis, could all culminate in another depression within several years.
• How Will the Economy Impact Employment Opportunities at Small Businesses?
  • As everything begins to reopen, there will be a higher demand for services that weren’t available during the last two years, which means small business owners will need to expand their staff in order to keep up.
  • Because job participation is 1.3% below what it was prior to the COVID crisis, small business owners are struggling to compete with the current wage inflation.
  • A mild recession could lead to significant layoffs among larger corporations, consequently increasing the existing talent pool for smaller businesses that are looking to hire new employees.
• What Can Small Business Owners Do to Prepare for Higher Prices and Interest Rates?
  • One step you can take to offset inflation is to analyze your fixed costs and see if there’s anything you can do to reduce them.
  • Another way you can save money is to make sure your small business has a very strong digital presence.
  • Prior to hiring any new employees, check to see how their salaries will impact your fixed costs. Otherwise, you may not be able to sustain their wages once an economic downturn hits.
  • Lastly, always make sure you have at least 12 to 18 months of cash reserves at any given point of time; you should also try to get your business credit score and history in good shape so that you can qualify for a loan if money becomes tight.

Links

• Biz2Credit
• How Inflation And Interest Rate Hikes Hurt Small Business

Transcript

The views and opinions expressed on this podcast are for informational purposes only, and solely those of the podcast participants, contributors, and guests, and do not constitute an endorsement by or necessarily represent the views of The Hartford or its affiliates.

You’re listening to the Small Biz Ahead podcast, brought to you by The Hartford.

Our Sponsor

This podcast is brought to you by The Hartford. When the unexpected strikes, The Hartford strikes back for over 1 million small business customers with property, liability, and workers compensation insurance. Check out The Hartford’s small business insurance at TheHartford.com.

Gene: Hey, everybody. Thanks for joining us again. This is Gene Marks here with the Small Biz Ahead podcast from The Hartford. I am without my colleague, Jon Aidukonis, today. He’s either lying on a beach or serving tuna fish sandwiches in some restaurant somewhere, because we all know how much he likes the restaurant business. But I do miss him and I wish he was here for this conversation, but we’re going to have a good conversation anyway. Because I have a guest on who I’ve known for a number of years, who I’ve followed, who I’ve written about his company, particularly, his company’s Small Biz Lending Index. It’s Rohit Arora. Rohit is the CEO and co-founder of Biz2Credit. That’s B-I-Z the number two Credit. So, Rohit, first of all, thanks for joining me.

Rohit: Yeah, thanks for the opportunity.

Gene: Yep. I’m glad that you are here. You have been in the small business space for a long, long time. Your company Biz2Credit does what? Tell us a little bit about it.

Rohit: Biz2Credit, me and my brother, we founded the company in 2007, 2008 time period in New York with an aim to help small businesses get access to credit. So we were there in what used to be pre-FinTech era, and the aim always was to create a very transparent way for businesses to get access to credit. And also not just see the options, but being able to fulfill those options. So over the years, we have now done close to $8 to $9 billion dollars of lending. We have over 200,000 customers. We have 650, 700 employees in the company. And we have seen the whole life cycle of… when we started the company, we saw the Great Recession coming in to the COVID crisis and now we’re in a post-COVID crisis. So we have seen a lot of different business cycles. We have experienced that with hundreds of thousands of small business customers across the country, across different industries, age groups, and also different sizes. So it has been a very, I would say, eventful journey over the last 14, 15 years now.

Gene: Yeah, it is amazing. And like I said, in the small business space, you guys are very well known. When you say that you offer the financing, so is that your company itself? Will I borrow money directly from Biz2Credit? Or are you more of an intermediary?

Rohit: So our model is actually very interesting. So we are a marketplace where what we have done is that instead of typically what marketplaces do is that they will generate a customer request and then they’ll shop it around, and then they let other people fulfill that. So what we did over the years, what we realized was that generating the request for credit is the easier part. It’s more challenging to fulfill that. So we actually built a full fulfillment platform where we have a lot of, I would say, lenders and or investor groups that includes banks, that includes insurance companies, that includes credit funds and other folks.

Rohit: And based on the risk rated appetite, we actually build portfolios. We manage that. We do all these servicing, all the collections, all the renewals, everything end-to-end to our own digital platforms. So as a customer, you don’t feel the pain about from where are you going to get the best credit option because we are curating it. We are actually constantly looking at it and we have our own scorecards, risk credit scorecards that is used by all the lenders. So the benefit of that to a borrower is that while they get the best options available out there, they don’t have to go and individually shop it around, and then they also get things in a very time-bound fashion.

Gene: So, I do want to get into our main topic, which is inflation and interest and your outlook here, but before we even jump into that, you just mentioned you talking about what Biz2Credit does, I’m dealing directly with you, you’re going to find me the best source of financing. You will be my relationship when it comes to the lender, which is great. Just before we leave that, what does that cost? Does the business pay extra for this to you? Or is this something that your banks pay you for this service?

Rohit: Yeah. So for small business owners, they don’t pay us anything except for the interest payments that they have to make on the borrowed money. And that interest is typically risk rated. So we have products which are very close to bank lending rates. Now I think they’re almost matching it with Fed increasing the interest rates to some of the products which are, I would say, in mid-teens stuff to high-teens stuff. So depending on your risk, depending on your industry, depending on where you are in the whole risk totem pole. And then we also have factor products, which are actually non-interest products. So we give them options of either taking a term loan or what we call a future receivable, depending on their need, depending on their credit profile, and also depending on how much documentation that they can provide. So based on that, those products are available to them.

Rohit: And the good thing there is that for them to use the platform, we have something known as a virtual CFO platform within that where they can go and benchmark their business. They can see all the different things happening. How they measuring against other businesses, what other fees they are paying to other service providers. Now all that is totally free for them. So they don’t have to go and spend any money to use these platforms out there.

Gene: Well, listen, you deal with so many small businesses you’ve got a good outlook on really the sentiment and the feeling of small businesses. At the end of March, and we’re having this conversation in the middle of May, you wrote a column for Forbes… you write regularly for Forbes, a very popular column on small business strategy. And this column focused on how inflation and interest rate hikes hurt small business, obviously, rising prices, supply chain issues, increase of interest these of these have a huge impact on business’s ability to manage their costs, to price, to quote to their customer