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Insights and Expertise

How business line of by expanding their operations. This means purchasing ad-
ditional equipment and investing in a new vehicle.
credit cards empower Instead of going through the traditional bank process to
secure a loan, the landscaping business can use an LOC
SMB owners payment card to draw the exact amount they need to fi-
nance their expansion.

By Will Tumulty Advantages for financial institutions
Rapid Finance Business LOC cards also provide significant advantages
for issuing FIs, providing a competitive edge over insti-
here are over 33 million small businesses in the tutions that do not offer flexible, tailored financing solu-
United States. Together, they generate more tions.
than 43 percent of the country's GDP and
T employ almost half of the American workforce • Increased stream of revenue: LOCs generate rev-
(see https://bit.ly/4amkM5B). Despite their essential role in enue through interest from drawn funds, as transac-
the U.S. economy, 38 percent of small businesses reported tion fees and cards associated with an LOC generate
they lack ready access to the working capital required to spending-based interchange revenue. Unlike tradi-
finance their operations and pursue growth opportunities tional loans, which are typically one-time transac-
(see https://bit.ly/40maBtp). tions, banks issuing business LOC cards can capital-
ize on ongoing usage of both the LOC and the card.
Many banks, credit unions and fintechs recognize the im- This can boost an institution's bottom line.
portance of quick decision-making and access to funds,
embracing technology that automates much of the SMB • Enhanced customer retention: Business owners are
lending process. However, with the economic landscape more likely to stay with institutions that provide tai-
rapidly changing, financial institutions (FIs) must look lored solutions that address their unique growth and
beyond traditional lending and banking solutions to help financing needs. Offering LOC cards can strengthen
small business customers thrive in a dynamic market- relationships with small business customers seeking
place. more flexible financing.
• Expanded borrower pool: LOC cards may appeal
What small business owners need most is real-time access to a larger range of small businesses, including ones
to capital that enables them to better manage cash flow, that may not qualify for traditional loans. Tapping
respond to market opportunities and guard against finan- into a larger segment of consumers enables institu-
cial risks. Beyond traditional SMB lending products, inno- tions to attract new customers and grow their lend-
vative FIs are further supporting their small business cus- ing portfolio.
tomers by offering business lines of credit (LOCs) paired
with payment card access. This equips small businesses Increased protection from risk and fraud
with 24/7 access to capital that can be managed directly
from a digital platform. Compared to traditional credit cards, issued LOC cards
often have enhanced security features that can mitigate
Advantages of business LOC prepaid cards risks associated with unauthorized use. Payment cards
tied to LOCs enable business owners to safely leverage
Flexible financing through a business LOC allows insti- their credit by reducing potential fraud risk.
tutions to address unique small business needs more ef-
fectively. Business LOCs enable SMB owners to have full The spending limits set by institutions reduce the risk of
control over the amount they draw to cover specific ex- business owners over-drawing funds and the chance of
penses, ensuring they use funds only when needed. This defaulting. Institutions can monitor transaction patterns
flexibility significantly reduces costs incurred from inter- for signs of financial strain, enabling them to intervene
est on unused capital. early. Additionally, real-time monitoring can track and
analyze transactions to detect suspicious transactions,
Rather than relying on typical banking hours and tradi- preventing unauthorized access.
tional methods like ACH and wire transfers, small busi-
ness owners with a business LOC card have almost instant By offering flexible, secure capital access, business LOC
availability of funds anytime, anywhere. This unbridled cards strengthen institutions' lending portfolios and
access empowers business owners to capitalize on op- empower small business clients to manage capital more
portunities—whether it's purchasing new equipment, ex- safely, fostering sustainable growth while mitigating ex-
ecuting that important marketing campaign or handling posure to potential risks.
unexpected expenses. For instance, a small landscaping
business might experience a significant increase in clients
within several local neighborhoods. The father and son Will Tumulty serves as CEO of Rapid Finance, www.rapidfinance.com.
who co-own the business want to capitalize on this growth Contact him at linkedin.com/in/will-tumulty-15a6462.

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