### The Evolving Landscape for Small Businesses

Banks have long been the go-to institution for small businesses in need of setting up accounts, securing credit, and receiving valuable advice about managing their cash flow effectively. However, this traditional model is undergoing a seismic shift, and small businesses are starting to explore alternative avenues that can provide them with far more than just the conventional banking experience.

### Transitioning from Banks to Digital Platforms

Luke Voiles, the Chief Executive Officer of the embedded financial solutions company Pipe, recently shared insights with Karen Webster about this pivotal change in the financial landscapes for small- and medium-sized businesses (SMBs). He emphasizes that the interaction point for acquiring capital and credit is transitioning away from brick-and-mortar bank branches towards software platforms that SMBs routinely use. These platforms enable businesses to serve their customers and efficiently manage backend operations. Voiles elaborates that this transformation is particularly noticeable when traditional banks define small businesses as those with sales scaling up to $25 million, ultimately leaving many smaller firms overlooked.

### Addressing Unmet Needs through Innovative Solutions

This gap presents a unique opportunity for Pipe, which launched its “capital-as-a-service” model about six months ago. These services have been seamlessly integrated within software-as-a-service (SaaS) platforms. Voiles pointed out that a staggering 85% of small businesses now utilize capital from companies like Square and Intuit—where he previously held leadership roles in small business lending—to fuel their growth. The emergence of Pipe aligns perfectly with the needs of these businesses.

### Streamlining Financial Services for Small Enterprises

Pipe’s innovative offerings integrate financial services directly into the technology stack of its partners. Voiles uses the example of a nail salon generating $500,000 in annual revenue. With just three clicks, the salon owner could secure an $80,000 loan, enabling them to expand their physical presence or purchase necessary equipment for scaling operations. Yet, it’s imperative to highlight that micro-businesses lining the streets often remain under-served. Their quest for credit solutions tailored to their operational expenses and working capital needs is often unmet.

### Bridging Gaps for Micro-Businesses

Voiles identifies a significant opportunity in this segment, explaining the lack of access to comprehensive features that larger firms might enjoy through products like American Express cards or digital-only cards offered by neobanks. These smaller companies frequently manage their operations using personal credit cards, depriving them of essential business credit solutions.

### Introducing the Pipe Business Card

Notably, Pipe has identified a target range within firms generating annual sales between $100,000 and $1 million—an area encompassing a vast majority of U.S. businesses. Following an expansion into the U.K., Pipe has unveiled the Pipe Business Card designed specifically for software and payments companies in the U.S. This charge card effectively serves as an extension of working capital, where the balances must be paid in full by the end of each billing cycle, thus helping business owners manage their cash flow more efficiently.

### Serving Diverse Business Needs

Voiles points out that industries such as nail salons, hair salons, spas, and coffee shops represent prime candidates for this innovative card. Issued by First Internet Bank of Indiana, the Pipe Business Card operates on a pay-in-full basis, requiring customers to fully settle their balances within 15 days of the statement closing date. Importantly, customers have the option to draw from a line of credit to manage their payment obligations, setting the card apart from traditional credit cards.

### Leveraging Partnerships for Risk Underwriting

The robust underwriting models that underpin Pipe’s core capital-as-a-service offering enable its SaaS partners to extend these cards to micro-businesses. Since the SaaS platforms have established long-term relationships with their clients, this arrangement significantly lowers the perceived risks involved in card issuance and credit access.

### Swift Implementation and Attractive Rewards

One major advantage of Pipe’s embedded card programs is their rapid deployment timeline, allowing them to be launched within days compared to the several months typically required for banks. In addition to this, the Pipe Business Card offers enticing rewards, including 1.5% cash back, and importantly, there are no annual fees associated with its use.

### Financial Sustainability through Interchange

In discussing the financial economics of the card, Voiles explains how interchange fees fund the rewards and how Pipe does not strive for the card to be a major profit center. By maintaining flexibility for customers to pay off their balances either by cash or by drawing down available Pipe capital lines, businesses can manage their expenses better. If a customer fails to pay off their balance within the specified time frame, a portion of the business’s daily sales will be allocated to gradually settle the outstanding amount.

### Tailored Solutions for Every Partner

Pipe customizes its underwriting models for each partner, drawing on five years of historical data and real-time inputs to refine their approach continually. Voiles expresses his vision of enabling businesses to invest with the knowledge that the necessary capital will be available when required.

### Future Innovations and Streamlined Management

Looking forward, Pipe plans to unveil additional services through its partner firms over the coming months. These new offerings will include automated spend management solutions that synchronize seamlessly with accounting and invoicing systems, thus alleviating some of the manual headaches associated with operating a business. Voiles emphasizes that the charge card will not only serve as a payment tool but will also facilitate strategic expense allocation, ultimately allowing business owners to focus on growth and new opportunities.

### Preparing for the Futuristic AI CFO

Additionally, Pipe is gearing up for the introduction of its “AI CFO” tool, designed to provide SMB owners with insights based on industry-specific data. This forthcoming feature aims to give businesses improved visibility into market benchmarks, their revenue patterns, and even generate forecasts. The approach also includes AI-driven payroll functionalities, further enhancing operational efficiency.

### The Path Forward with Traditional Banking Institutions

Looking into future collaborations, Voiles remains open to the possibility of banks partnering with Pipe to create referral networks that can funnel SMB clients into embedded ecosystems. He acknowledges the need for sophisticated banking partners that are willing to explore innovative financial solutions and integrate them into existing structures.

### Solving Complex Challenges, One Industry at a Time

In reflection, Voiles outlines Pipe’s core mission—to resolve an array of fundamental challenges faced by SMBs and the SaaS platforms that serve them. With a commitment to tackling these issues comprehensively, Pipe aims to enhance the financial landscape for small businesses, one industry sector at a time.

### The Role of AI legalese decoder

Amidst the rapidly changing financial ecosystem, the complexities surrounding legal agreements can be daunting for small businesses. The AI legalese decoder tool can be invaluable here by simplifying complex legal terminology and contracts related to banking and financial services. This tool empowers business owners to quickly understand their obligations and rights, reducing potential legal pitfalls, and enhancing their ability to utilize financial products like those offered by Pipe more effectively.