B2B Payments

SMBs Find Access To Finance Is No Longer Their Only Trade Worry

A new survey released this week by the U.S. Federal Reserve finds small businesses are enjoying boosted confidence (and revenues). But how are SMBs faring on a global scale? The research is favorable for companies trading across borders, too, as technology gears up to increase access to trade finance and, as a result, propels business growth.

The CEO of the Dubai Multi Commodities Centre (DMCC), Gautam Sashittal, likened FinTech’s impact on modern trade as that of the advent of the shipping container in the 1950s.

“Just as the shipping container revolutionized trade in the 1950s, sweeping advances in tech will reshape trade and how we move goods across borders,” he said in a statement announcing the DMCC’s The Future of Trade report, published this month. “Our research helps us all understand how global trade will evolve and how we can prepare over the next decade.”

It’s good news for entrepreneurs, and a welcomingly different conclusion than one drawn by the Asian Development Bank, whose 2017 report on the topic concluded that FinTech has not made a meaningful impact on access to trade finance globally.

According to the DMCC, alternative finance is providing more small businesses with access to trade finance products, addressing the estimated 50 percent of SMB trade finance funding applications rejected by traditional banks. Asia Pacific’s alternative finance market has more than doubled between 2015 and 2016, now worth $245.2 billion, researchers found.

Moving forward, blockchain will be an instrumental innovation to continue FinTech’s disruption of the trade finance market, the DMCC said.

“Trade and trade finance will be revolutionized by blockchain and other emerging technologies,” said DMCC executive chairman Ahmed Bin Sulayem in another statement.

It’s unclear, however, whether SMBs in other markets around the globe will feel the positive effects of FinTech in their own global trade operations. Interestingly, in the U.S., while the Federal Reserve found that small business optimism is on the rise, fewer entrepreneurs are seeking finance – just 40 percent of SMBs surveyed said they were seeking external funding, down from 45 percent in 2017.

“Even small businesses with the potential for strong growth are struggling to get sufficient financing,” said New York Fed President William Dudley in an essay reaction to the survey, according to Reuters.

Nearly two-thirds of small businesses said they struggle to pay operating costs, purchase inventory or repay debt, and two-thirds said they rely on personal funds from an investor or the business owner itself.

Despite these challenges, the Fed highlighted the positive findings of the survey: Nearly three-quarters of small businesses expect revenue to increase this year, and nearly half plan to add more employees. Both statistics are higher than last year. And while fewer SMBs said they are seeking financing to expand this year, the Fed said the 59 percent that want to expand (and will seek out capital to do so) suggests a positive outlook for the national economy.

Amid FinTech’s advances to broaden access to capital for small businesses – and as small businesses ponder whether they will seek financing at all – is an emerging concern for companies of all sizes that trade globally.

Separate research from Dimension Data, in its NTT Security 2018 Global Threat Intelligence Report, warned that cyberattacks are increasingly targeting supply chains, with cyber attackers after intellectual property and trade secrets, as reported by The Economic Times of India. With a 350 percent increase in ransomware overall last year (accounting for 7 percent of all global malware attacks), it’s clear that access to trade finance is no longer the only hurdle for small businesses ready to expand across borders.

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