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ChapterTitleEducation

Why SMB credit cards are

merchant lifelines

are rarely taken into account by banks when assessing
risk. The missed opportunity for these banks is a new
opportunity for ISOs and acquirers.
A small business credit card specifically built for the
types of merchants served by merchant service providers
is an ideal solution. By leveraging the merchant's card
processing receivables, this type of credit card can enable
merchants to take control of their cash flow and gain
access to a small business credit card.
Such a program would include a business credit card with
a line of credit that could be up to $10,000, based on a
merchant's FICO score. It would also split-settle a portion
of the merchant's daily card processing deposits to the
credit card. The combination of the line of credit and daily
deposits to the credit card would thus provide greater
purchasing power for the merchant and help the merchant
By Scott Goldthwaite better manage cash flow.
Aliaswire Inc. A new revenue source for
merchant service providers
he impact of the coronavirus pandemic is inten-
sifying a challenge that many of the more than Also, because the program entails credit card issuing,
30 million small businesses have been facing additional benefits would include a revenue share to the
T already: obtaining credit. According to the 2019 ISO/acquirer from interchange generated when merchants
Report on Employer Firms by the Federal Reserve Bank, make purchases with the card.
nearly one-third of small businesses rely on credit to help
with cash flow and lack the necessary funds to meet unex- ISOs and acquirers would then use the revenue share
pected expenses. to reduce merchant processing fees. This innovative
approach to merchant acquiring could yield significant
Numerous small business merchants address this savings through the reduction of merchant processing
challenge by taking out short-term business loans or fees. And for the merchant, the credit card can provide a
using personal credit cards to bridge the gap. While credit revolving line of credit to the business and, unlike debit
cards with a revolving line of credit are a good funding cards, this can help the merchant build a credit history.
source for merchants, a majority of small business owners
do not meet the rigid underwriting policies of most, if not During times like we're experiencing today, when the
all, major banks. The global pandemic has put additional business landscape shifts to create unique challenges,
pressure on banks as requests for business credit increase, there is a pressing need for small businesses to obtain
making the underwriting process even more inflexible. credit to maintain and grow. ISOs and acquirers can help
support America's small businesses while capitalizing
While using personal credit cards to make everyday on the opportunity by providing their merchant with a
business expenditures may solve short-term cash flow credit card for making purchases and managing business
problems, these cards can take a toll on a business owner's expenses.
personal credit score, which may inhibit their ability to
finance personal needs, such as refinancing a home or Providing merchants an integrated accounts receivable/
purchasing a car. accounts payable solution paves the way for stronger
and longer-lasting relationships, reducing churn and
An opportunity for ISOs, acquirers increasing ISO and acquirer revenues.
Historically, banks decline the vast majority of small
business credit card applications because it is very Scott Goldthwaite is president at Aliaswire Inc. If you have questions
difficult for the banks to assess the risk of newly opened or would like to learn more about merchant credit needs or Aliaswire's
businesses, sole proprietors or business owners with low small business credit card issuing platform, please reach out to him at
credit scores. Merchants' daily card processing receivables sgoldthwaite@aliaswire.com.
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