Quick.me: The Fundamentals Of Ethical SMB Lending

This article first appeared on PYMNTS on September 5, 2017.

While some of the entrepreneurs we talk to at PYMNTS seem to have been almost born to solve the problem they founded a company to take on, there are also some who have taken a slightly more circuitous route.

Take the team at Quick.Me, a firm that, in its current incarnation, provides working capital to small businesses through SaaS and POS platforms. But that, according to Founder and CEO Ola Okeshola, is very different from where the company started. “We didn’t start out like most lending platforms. We like to say that we didn’t choose this path; this idea chose us.”

Quick.me started out as a marketplace to make it easier for consumers to book and pay for services provided by small businesses. And, in its early days, as it was acquiring those SMB partners, executives kept hearing a recurring complaint. That complaint related to the need for access to capital to grow and run their businesses. Instead of making it easier for SMBs to acquire customers, Okeshola and his team decided to make it easier for SMBs to acquire working capital quickly.

“We were trying to solve a simple inefficiency in the [SMB] space — most of which were caused by the lumpiness of cash flow. Our app allowed businesses to schedule payments. Then, it dawned on us: Since we have access to all the payments transactions, instead of making it faster for them to be paid, why not make it easier for them to access a line of working capital via a merchant cash advance product?”

That product worked well, but there was a “but,” and a pretty big one at that. Okeshola noted that acquiring those SMB customers was expensive, a cost that didn’t seem sensible to take on in an environment full of SaaS companies and POS providers that had already done excellent work aggregating just the types of small and new business Quick.me could service with its lending platform. The path chosen was to partner with those firms so they could help their customers gain access to working capital.
With a twist.

A Different Outlook on Lending

A merchant cash advance (MCA) specifically refers to a lump-sum cash loan given to a company in return for a percentage of its daily credit card receipts. They range in size from $10,000 to $1 million, depending on the size and volume of the business. These loans provide working capital relief but can be quite costly for merchants with interest rates ranging between 8 percent and 30 percent.

But Quick.me, Okeshola noted, operates differently.

He and his team don’t think it’s fair to penalize SMBs for running into cash flow lumps and bumps. Coming up short on funds while waiting for receivables to be paid and smoothing over revenue during seasonal highs and lows is something that happens to even well-run businesses.

“We fundamentally believe that any of us could run into bad luck tomorrow, and we always take that into consideration when we lend,” Okeshola said.
It’s an empathic approach, he said, but also the rational one. Gouging firms in need of a short-term cash infusion is not good business, because a firm that gets crushed under crippling payments on a loan and goes under is also a firm that can never work with Quick.me again.

Plus, he noted, no matter what one tends to hear about insanely high rates being absolutely necessary to defer risk, that doesn’t have to be the case.
“We think that bad money drives out good money, which is why we work with POS providers who have a history of transactions that we can see,” Okeshola said, adding that through those partnerships, they use data to determine a well-reasoned approach to extending cash to SMBs in need of it.

He also believes that a great majority of high-priced lending comes from lack of knowledge. If a new business asks someone they don’t know to lend them $5,000, the natural inclination is to say no or charge a very high interest rate on the funds to de-risk the decision. Okeshola, through Quick.me, wants to know the firms it is enabling capital for and then tailor the products it can offer to that actual need.

Avoiding the Siren Song of “Disrupting the Banks”

Much of what Quick.me is able to do, and intends to do in the future, is predicated on what Okeshola calls a fundamental understanding of the fundamentals.
“There is this unhealthy and compulsive obsession with disrupting banks,” he said. “And people are just pouring money into things where the economics are not possibly favorable. The reality is to really disrupt banks, one has to have a sustainable competitive advantage by the value chain network. Most startups don’t really have that.”

Banks are so incredibly competitive and powerful today, he explained, because they have a “really, really, really low cost of capital.”

“There is no way to beat a zero cost of capital as an advantage that technology by itself can provide,” Okeshola said, pointing out that banks can acquire this same kind of technological innovation that these startup disruptors deploy. That means that the Quick.me team doesn’t wake up every day and ask themselves,
“How are we going to disrupt banks today?” because that question won’t help them run their business better.

They ask themselves instead about their fundamentals: what their SMB customers need; how they can provide it and how they can do all of that while living up to their high ethical ideals about using credit, lending and smart decisioning as tools to help small businesses and using channels that already touch those businesses to reach them.

It’s a lot of work, and Quick.me is still perfecting that offering in beta and simultaneously working to build an international presence for the firm. But, Okeshola noted, it’s work worth doing, since before they started their life as a lending platform, their customers told them it was something they really needed.

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