B2B Payments

Freshbooks Survey Finds Entrepreneurs Aren’t Into Alt Lending


It’s not surprising that the latest research from SME accounting firm Freshbooks reveals that entrepreneurs often struggle to gain the expertise and resources they need to run their business. But what is surprising, however, is how these small business owners compensate for lack of experience and how they navigate the resources available to them.

Freshbooks VP of Strategy Matthew Baker highlighted these findings in a chat with PYMNTS to weave through the research and sound off on some of the survey results that most caught his attention.

For instance, “Self-Employed Professionals and Small Business Owners in America: The Rewards and Challenges of Career Independence,” released today (March 22), found that many of the entrepreneurs surveyed plan to stay in this type of employment position.

“The overwhelming majority of participants in this study work independently because they want to and not because they have to,” the report declared. Considering some of the dialogue Baker said Freshbooks has had with SMEs, this conclusion was a bit unexpected.

“When I speak to customers sometimes, we know that people get displaced and become self-employed because there has been some restructuring in the corporate world or some other reason,” he said. “They’ve been pushed into it.”

He said he might have assumed that a larger portion of entrepreneurs would have wanted to get back into the corporate world. Not so, Freshbooks’ report found.

“The vast majority of folks want to stay self-employed,” Baker explained. “For us, that’s an important trigger in the sense that this isn’t a temporary situation for them. They’re going to continue working for themselves.”

Learning From Their Mistakes

With so many entrepreneurs ready to remain as such, these professionals are taking on a role as part of what many experts say is the “bedrock” of the national economy. It’s a large responsibility, but as Freshbooks’ survey found, many small business owners are learning how to operate with a trial-and-error mindset.

Most of the entrepreneurs surveyed (52 percent) said they are somewhere in between a financial management leader and a laggard. More than a quarter (28 percent) admitted that they had already made a significant financial mistake running their business, with just as many saying that issues of company finances keep them up at night.

The good news is that 70 percent of entrepreneurs said they have learned and are more financially savvy today than they were when they first began running their business.

“I’m not surprised that they’re learning as they go,” Baker said of these findings. “To me, this sounds like experience leads to learning over time.”

There may be short-term negative effects of these errors. But perhaps more importantly, Baker said, is that the data suggests entrepreneurs do not have the education they might need when they first launch their own business.

“Certainly, we hear from folks that they didn’t necessarily get the proper training to run a business before doing it,” he said.

Today, the technologies and financial services available to small business owners can automate many business processes. According to Baker, this posits an interesting challenge: How can these FinServ providers meet the needs of entrepreneurs, without taking away opportunities for these business owners to learn for themselves?

“From my perspective, as a player in the financial space, we try to make running your business as easy as possible,” he said. “But one thing that stands out here is if you automate too much, perhaps people don’t be learning about what it takes to run the business, and therefore you don’t get the benefits of that.”

“I think there’s a trade-off,” he added, “between making it easy, but not making it so easy that folks are oblivious to what it takes to manage finances.”

Access To Resources

Experience is irreplaceable when learning how to run a business, but with so many services available to SMEs, adoption of FinTech is also a critical component.

According to Baker, Freshbooks’ report found an interesting dynamic in how entrepreneurs actually access such solutions. While there is certainly a DIY culture of entrepreneurship, there is what Baker described as a “barter economy” at play, too. Many small business owners will collaborate with service providers, trading their own services for the services of another.

For example, a digital marketer may lend its expertise to a graphic designer in exchange for the graphic designer’s own services, he said.

“I thought that was really interesting,” Baker reflected, “and foretelling of maybe some of the networks that will creep up in the future.”

But entrepreneurs aren’t totally on board with some of the technologies available to them today. One of the most striking findings of Freshbooks’ report is that only about a tenth of entrepreneurs have used some form of alternative finance.

While most entrepreneurs said they wished there were more alternatives to big banks (with 52 percent reporting that big banks aren’t designed to service SMEs), 75 percent said they are uncomfortable or unsure about working with an alternative lender in the future. Baker said this data might reflect that, despite the attention to and investment in alternative lending, the industry hasn’t quite taken off among SMEs.

“What is clear in the survey is that folks weren’t jazzed about working with banks,” he said. “Some of their perceptions of banking is about it not being a great fit for them. But there is the same feeling that these alternative lenders also aren’t a great fit. I think it may be a combination of understanding what they offer, which is still new, and that a lot of times the rates may not be as attractive as a bank.”



New forms of alternative credit and point-of-sale (POS) lending options like ‘buy now, pay later’ (BNPL) leverage the growing influence of payments choice on customer loyalty. Nearly 60 percent of consumers say such digital options now influence where and how they shop—especially touchless payments and robust, well-crafted ecommerce checkouts—so, merchants have a clear mandate: understand what has changed and adjust accordingly. Join PYMNTS CEO Karen Webster together with PayPal’s Greg Lisiewski, BigCommerce’s Mark Rosales, and Adore Me’s Camille Kress as they spotlight key findings from the new PYMNTS-PayPal study, “How We Shop” and map out faster, better pathways to a stronger recovery.

Click to comment