If we were at an entrepreneurs' convention and asked business founders –regardless of their size– what is the main challenge they face as they grow, their answer would most likely be related to the accessibility of financing for their businesses.
The International Finance Corporation found that about 40% of micro, SMEs in developing countries face a $5.2 trillion annual shortfall in financing needs. In turn, this figure suggests that 1.4 times more investment is needed to address this problem than is currently the case.
While this type of business is essential to any economy, the attention given to it by traditional banks has been on a downward trend. Nowadays, it is much more common for a business to start up with the founders' money, or that of their friends or relatives, than with a financial institution that entrusts them with a loan.
Although bootstrapping is not intrinsically negative, over the medium and long term, –especially as the company's growth goals become more ambitious–, it is not a sustainable model.
Small and medium-sized companies, as well as high-growth companies, must have a comprehensive solution that meets their particular financing needs.
Although there are efforts by various governments at a national level –either on their own or even in public-private partnerships–, corporate finance is a sector in which some companies are beginning to show disruptive alternatives.
In order to share the details of our new program Tribal Packages, here we explain how important it is for companies to have financing alternatives that understand their specific needs thoroughly.
It is obviously important for companies to have an efficient way to raise cash to stay operational. However, as they grow, their financing needs evolve and become more complex.
Moreover, even today, companies founded under the startup or scale-up models are born facing challenges that a few decades ago were unthinkable for a newly created company (such as burn or churn rate, for example).
However, being a bit more technical, SMEs play a major role in the economy of many countries, especially developing ones, as they contribute significantly to job creation and technological development.
According to World Bank figures, globally, they account for 90% of businesses and 50% of jobs. In addition, they contribute up to 40% of the Gross Domestic Product of emerging economies. What is interesting about these figures is not only the fact that they show the importance of high-impact companies, but also that they only consider formal companies.
However, and despite the fact that the importance of financing for any business is more than proven, access to quality products that advance this mission continues to be one of the main reasons on which the success or failure of a company depends.
Currently, SMEs are unlikely to get loans from large financial institutions. This lack of accessibility is due to a number of different obstacles. Let's take a look at some of those identified by the G20 Research Division.
Higher risk, lower profit
Traditional banks and financial institutions find that lending to SMEs, as well as to startups and scale-ups, generates lower profits and represents a higher risk for their portfolio.
The current scrutiny in the evaluation of access to business loans –especially after the 2008 crisis– has created an environment of distrust among banks towards "smaller" consumers in contrast to the support received by consolidated companies, which translates into higher interest rates for those with fewer resources.
Lack of public information
Unless it is a public company, there is a deficit amongst most companies regarding the access and quality of their financial statements.
This has an impact on whether or not they are eligible for bank loans, as these documents are essential for banks and rating agencies to evaluate their credit profile and the risk involved in lending to them.
Incompatibility with business models
Earlier, we pointed out that the lack of access to financing alternatives hinders innovation.
Similarly, traditional banks have stopped the diversification of their credit products arguing that they are incompatible with the business models and development plans of high-growth companies.
Although some of them have other funding sources –such as equity or venture capital funds–, in reality these are alternatives whose complexity continues to imply a barrier to access; mainly for those startups that do not yet have a long track record, but require urgent support in their finances.
An alternative financing solution should provide support for companies as they expand their operations and activities into new markets.
Alternatives in developmental stages
Although there is a huge potential to positively impact social prosperity through financial technology, the use of such options is limited to the level of digital literacy of consumers.
Similarly, certain companies offer products whose guarantees are insufficient to meet the demand, making their customers prone to risks such as fraud, information leaks, and cyber-attacks.
Furthermore, the authorities have yet to design robust policies to ensure adequate regulation of the sector.
Aware of the importance of extending options to companies in the face of all the challenges they face in terms of access to quality financing, Tribal created a new product that offers a solution that fits the needs of companies that are looking for a competitive offer.
We are very pleased to share our packages with the high-growth business community. The Latin America and Caribbean region, where Mexico belongs, is the market with the second largest gap in terms of access to financial services.
However, this is also indicative of the enormous potential in the region: 87% of formal companies do not have access to a credit product, according to World Bank estimates.
By creating these packages, we provide all these companies with a solution that adapts to their particular needs according to the stage of growth they are in. We have three modalities:
Join us to learn more about the operation, features, and benefits of this new product.
We created this package for companies looking to cover short-term or recurring operating expenses, such as software subscriptions, business travel, or even real-time marketing advertising campaigns.
We seek to empower the different teams in a company with the ability to generate unlimited, secure, virtual cards with spending controls.
In addition, like all packages, Access provides control, visibility, and reporting in a couple of clicks and in real-time.
We designed this package with all the benefits of Access, and we added the possibility of making digital interbank payments. This means that any company with this package will be able to easily pay their suppliers, whether they are local or international.
The advantage of this feature for any company is that these payments can be made through your Tribal credit line. This is a significant contribution to the monthly cash flow management, as it allows the invoice to be settled in the same period as the credit line.
It is intended for those companies that are about to start an expansion process. We know that this stage is coupled with the need for funds to make considerable investments.
Therefore, we make it easier for companies that use this package to pay with longer terms, knowing that this way they will be able to face the seasonal nature of their operations.
In the same way, it helps them to extend the time window to reserve cash and pay for these investments in a timely manner, without compromising their day-to-day cash flow.
As part of this package, we offer the possibility of accessing financing in terms of 60, 90, or up to 120 days
At Tribal we are firmly committed to offering access to first-class financial products to Latin American companies. That is why most of our effort is directed to offering high-quality products with the fairest and most competitive financing costs.
We do not charge for account management, card issuance, annuities, platform subscriptions, or any kind of commission for transactional services.
Our financing fees are strictly based on the utilization of each company's line of credit. We designed these packages to support any business at any stage of its development.
Knowing that our product is designed to act as a catalyst for a company's growth, our Customer Success team is in close communication and provides visibility into the behavior of each account, so that if the company needs to change packages, we will have the best information ready to make the decision that is best for the business.
This new offering that Tribal is launching to the market aims to continue our purpose of supporting companies that are not represented or served by the traditional banking infrastructure.
As a company that grew under the startup model, we understand the huge difference between the financial services offered in the market and those that a high-impact company needs to make a difference in its sector.
We keep taking inspiration from all of our colleagues and founders who continue to develop incredible companies in different latitudes. It is for them that we are interested in continuing to innovate and disrupt the financial services sector in the region.
In order to enhance and exponentiate the growth of their companies, we want to continue helping them to do better business.