How fintech can help small businesses affected by inflation and rising interest rates
Created on Jan 17, 2023
Updated on Jan 17, 2023

2022 was the year when US small businesses' concerns centered on whether they would survive inflation and rising interest rates. According to data collected by the US Chamber of Commerce last September, half of small businesses say inflation is their biggest challenge, and 40% reported that they are very concerned about the impact of rising interest rates on their business. Data from Capterra Research put inflation as the top concern among SMB supply chain professionals going into 2023, followed close behind by inventory and the economic recession.

With prices rising and interest rates climbing, many small businesses struggling to maintain capital cannot secure aid from traditional financing tools such as bank loans. Thankfully, the fintech sector is sweeping in to give small businesses the opportunity to not only survive, but thrive in these uncertain times.

In this article, we’ll walk you through six fintech technologies that can help small businesses better manage their cash flow and meet the moment.

1. Real time payments (RTP) to shorten the payment cycle

The biggest antagonist for small businesses trying to maintain cash flow during economic crises is time. And with prices and interest rates higher than ever, one missed payment could result in business collapse.

Why are payments in 2023 still taking so long to arrive? A major factor is that various industries have yet to adopt digital payments and are still relying on legacy payment methods, such as paper checks, which need to be physically mailed and deposited, taking up much more time.

Real-time payment (RTP) networks are one of the key technologies emerging to combat this problem. RTP refers to a payment processing network used to send money electronically between banks in the US. The US government identified the need for this kind of fintech early on, which is why they are readying the Federal Reserve Banks’ instant payment service, U.S. FedNow, to launch later this year.

According to a Forbes survey, almost half of US businesses are interested in using RTP to pay recurring or ad hoc bills, demonstrating the importance of this kind of network.

  • Fintech solution: RTP networks
  • How it helps: Shortens the payment cycle and reduces risk to cash flow
2. All-in-one payment solutions for more effective cash management

Smart cash management is also pivotal to staying cash flow-positive amidst inflation, but not all small businesses have the AR / AP manpower to optimize in this area. That’s why many businesses are shifting to digital accounting solutions.

PYMNTS research found that four out of 10 SMBs have already made the change to an online all-in-one payment platform, with more than half saying the tools have made cash management easier and 32% seeing improvements in working capital, following implementation.

The benefits of an all-in-one payment platform include:

  • Visibility of entire payer / payee network in one online dashboard

  • Customization to let buyers and payers choose the payment methods best suited to each

  • Ability to purchase inventory from vendors that don’t accept credit card payments

  • Fintech solution: All-in-one payment platform

  • How it helps: Makes cash management easier and more transparent

3. Data and AI for more visible, collaborative AP/AR

Following on the visibility that an all-in-one-payment platform provides for internal accounting, small businesses can integrate data and artificial intelligence (AI) for collaboration with external payers or payees. By offering transparency on the current payment statuses or forecasted payment situations, data and AI can remove friction at any stage of the payment cycle for both sides. This can help to avoid missed or delayed payments.

  • Fintech solution: Data and artificial intelligence
  • How it helps: Frictionless collaboration with supply chain partners
4. Cash flow forecasting to stay ahead of upcoming expenses

We have one more tool to suggest throwing on your dashboard – cash flow forecasting and management. This kind of solution turns cash management into a much more proactive process, tracking expenses and receipts to forecast your future financial status.

One use case for this tool is to better estimate your seasonal inventory needs to make sure you have the right amount of stock, avoiding overspend or lack of stock which could lead to customer loss. This is exactly the kind of data small businesses need to respond to the volatile situation created by inflation and rising interest rates.

  • Fintech solution: Cash flow forecasting and management
  • How it helps: Better preparedness for fluctuating financial situations
5. Open banking enables lender flexibility & customization

Open banking is not a new story in fintech, but it offers new advantages to small businesses facing the challenges presented by the current economic situation. For lenders, open banking allows a much higher degree of customization for financing solutions, such as repayment options that can be adapted to fit the borrower (small business) as their financial situation evolves. This can provide a degree of flexibility that traditional financing tools cannot, helping small businesses weather the tougher times more smoothly.

  • Fintech solution: Opening banking
  • How it helps: More customized financing tools giving SMBs more flexible repayment terms
6. Buy-Now-Pay-Later to keep inventory strong

In the end, what small businesses need more than anything in uncertain times is access to fast capital to get over the hump. Being short on inventory or cash due to high prices leaves companies in a very vulnerable position, which is why it's worthwhile to consider B2B Buy-Now-Pay-Later (BNPL) solutions. BNPL allows small businesses feeling the weight of rising prices and interest rates to gain fast access to working capital and maintain a healthy cash flow.

  • Fintech solution: Buy-Now-Pay-Later
  • How it helps: Helps maintain inventory and healthy capital flow
BlueX Pay-it-Later empowers small businesses via logistics and inventory financing

As a fintech company dedicated to developing alternative financing options for small businesses, BlueX has built payment platforms and Pay-it-Later solutions specifically for the kind of hurdles you may be facing at this moment. BlueX Pay-it-Later offers fast access to up to $1 million for your cargo and all your logistic service needs.

Reach out to the BlueX team on how to make better payments and amplify your cash flow.