Role of Fintech in boosting small businesses post-pandemic

Small businesses are essential to any economy as they create job opportunities and innovations, thereby directly influencing the economy. Both small businesses and big corporate should co-exist in a healthy economy.

Small businesses are closer to consumers than their corporate counterparts and, unfortunately, are the most vulnerable to market fluctuations, as we saw when the pandemic hit.

Small businesses statistics

According to the March 2021 report by SBA, there are over 31.7 million small businesses in the United States. Small Businesses employ 59.9 million people, which is 47% of the total workforce of the United States. Small businesses employ 90% of the total business with less than 20 employees. Small businesses directly contribute to about 50% of America’s annual GDP.

The SBA report clearly shows how small businesses are important in U.S Economy. The report also shows a decrease in the growth of small businesses during the pandemic.

How do traditional small businesses function during the pandemic?

Many small business industries closed during the pandemic, such as food services, educational services, and accommodations. According to NFIB, the U.S. Small Business Optimism Index decreased by 9.3 points from 104.3 in January 2020 to 95.0 in January 2021. The main reason behind this was

1. Changed customer behavior due to physical distancing.
2. Operational restrictions due to COVID protocols.

Other small businesses may close because they were already at risk financially before the crisis. Indeed, recent research by the Federal Reserve finds that 64% of small businesses think they cannot survive and are ready to apply for government aids if provided at the end of 2020.

What are the small business challenges?

Small businesses in the U.S were facing many issues from the beginning of the pandemic and continued when the Delta variant hit. Now that the new Omicron variant is in action, these challenges are forecasted to increase only. According to the Small Business Credit Survey of 2021, 95% of firms continue to face one or more of post-pandemic challenges like

1. Weak demand for products/services
2. Government-mandated restrictions
3. Supply chain disruptions
4. Labor shortages

Biden’s Plan for Omicron variant starts with Small Businesses

According to the White House, President Joe Biden announced a plan to help America get better protected against the Delta and Omicron variants and emphasize Small Businesses to keep businesses open and quickly respond to surges if needed during the colder months.

Rising Inflation

The current inflation rate is increasing in the United States and reached 6.8% last November 2021 which is the highest in more than three decades as measured by the CPI and is forecasted to be normal only in the middle of 2022.

How inflation can affect business?

Inflation can increase business expenses. It can also increase the purchasing cost of raw materials. The central bank's policy-setting Federal Open Market Committee (FOMC) also announced accelerating the phase-out of its stimulus measures to end them in March. It will allow the bank to deploy its most potent weapon against inflation as soon as May, i.e., raising lending rates.

How to survive all these challenges?

Small businesses are closest to consumers and are the most vulnerable to market fluctuations. To prepare for survival, small businesses need efficient systems and processes to get excellent visibility of the business so they can

1. Cut down unnecessary costs and maintain profit.
2. Decide on pricing by comparing market competition.
3. Forecast supply chain issues due to price hikes.
4. Manage the inventory according to fluctuations in the market.

Then only small businesses can act fast and stay ahead of the competition.

Understanding Fintech

Financial technology refers to innovations that enhance financial transactions, from digital money to double-entry bookkeeping. Fintech’s outran banks in 2020 and became popular when the first wave of COVID hit. Fintechs and banks are racing to keep customers with innovative and customer-oriented financial services.

The advantage of Fintech’s over the traditional bank is that Fintech’s are already in the digital world and can readily provide innovations compared to conventional banks, which are still in the transformation phase, reluctant to accept new age innovations. All these factors made Fintech popular among small businesses and their customers.

How Fintech’s can boost Small businesses?

Most of the small businesses employ fewer employees as the SBCS report of 2021 projects, 65% of Small businesses employ less than 4 people. Fewer people mean fewer people to manage the business.

To survive, small businesses need specialists to take care of the accounting and bookkeeping functions. Hiring a new employee will be a problem for the already budget-constrained small businesses. Signing up for any of the all-in-one Fintech solutions like Online Check Writer can benefit greatly. Many of the Fintech’s provide digital solutions for their customers.

Online Check Writer provides Central Accounting which can directly improve business by analyzing the report and cutting unnecessary expenses. It provides centralized reporting which can aggregate reports from multiple areas like Checks created, Deposits made, Drafts accepted, and any cash transactions that are logged.

These features are perfectly suited for small businesses as they can control their daily business by doing cost-benefit analysis which corporate businesses only do. No matter how you enter the transaction data, it can be categorized for a better understanding of the business with the Categorized Report function.

The daily, weekly, monthly reports can also be viewed in Online Check Writer, which allows small businesses to understand the expenses and also provides various intelligent reports with which small businesses can forecast supply chain disruptions and price hikes in raw materials and manage their inventory by doing market analysis.

Online Check Writer also incorporates cloud-based check printing solutions for the check requirements of its customers. Also with OCW, small businesses can send and receive unlimited ACH transactions without any extra cost. All these can boost business and can cut down unexpected business expenses.

Wrapping Up

Depending on the business and the industry, small businesses take time to adjust to the new challenges and demands posed by the COVID Delta variant. Now that the Omicron variant is in action, it’s sure that the condition would get worse rather than getting better. Even though the government’s policies to fight back pandemics including stimulus checks are beneficial to small businesses, the temporary inflation can also adversely affect small businesses, leaving the market unstable.

To survive small businesses need to be more flexible and dynamic to the market trends. Adopting new-age fintech solutions can greatly benefit small businesses as it can help them closely understand market trends. Fintech’s also needed to understand small business challenges and provide flexible solutions to survive and continue their popularity.