Be Extra Cautious When Lending to Micro-SMBs

When credit managers are extending lines of credit, the size of their customers’ business is a factor to weigh in the decision-making process. Just because a business is small doesn’t mean it will never get credit, but both parties have to remain more alert. On Aug. 27, global fintech company Tide explained how micro-SMBs (small- to medium-sized business), those typically having less than 10 employees, exhibit a few specific risks in connection to their size.

As small businesses are getting off the ground, Tide CEO Oliver Prill told PYMNTS, there’s always a chance they won’t make it. There is great probability that costs will run high in the business’ early stages, leaving potential creditors uncertain about the investment. Although Tide is not a direct lender, the company is a data provider that helps manage credit risk for such businesses.

Unfortunately, Prill continued, smaller businesses are also more susceptible to financial crimes, such as money laundering, which again deters credit managers. According to an article by Influencive, micro-SMBs are prime targets because “many startups lack the resources to recover once their business operations have been interrupted and/or their brand’s reputation has been compromised.”

“For this reason, it is of paramount importance for small businesses to consult with cybersecurity experts and utilize IT services that ensure the security of their networks,” Influencive states. “Also, by deploying an IT infrastructure, small business [should] not only streamline their business operations, but also become competent enough to fight off the competition and survive hostile markets.”

—Andrew Michaels, editorial associate

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