Facebook said this week it’s ramping up its support for small and medium-sized businesses (SMBs) owned by women and minorities with an expanded program that offers to buy up outstanding invoices and give entrepreneurs instant access to the funds they’re owed and the cash flow they need.
The company has committed $100 million to the Invoice Fast Track program that charges SMBs a small fee for the cash advances and has been designed to support the “common good” rather than enrich the social media platform, Director of Global Supplier Diversity Jason Trimiew told PYMNTS in an interview.
“We know the challenges that a lot of these diverse-owned businesses in particular face,” he explained. “And we know that when these businesses are thriving, we can all do a lot better. So, we’re stepping in to help.”
Trimiew said even before the COVID-19 pandemic SMBs have long struggled with extended payment terms and the pandemic has only made things worse as customers suddenly felt the need to hold their cash for longer, he explained. It means SMBs are unable to access the capital they need to keep their businesses up and running.
More like this: For Main Street SMBs, BNPL Can Unlock New Consumer Spend
A Typical SMB Benefits
Trimiew referenced the case of consulting startup Yardstick Management and Ebby Parsons as an example of what the invoice liquidation program can do.
“As Ebby put it, when the pandemic hit, consulting was one of those things that was seen as ‘nice to have’ but not a ‘must-have’ so when the pandemic arrived its revenue dried up,” Trimiew said.
Fast forward several lean months and the situation changed drastically for Yardstick, as scores of companies were suddenly seeking consultation on diversity and inclusion programs in the wake of the social unrest and changes that followed the murder of George Floyd.
As a result, Yardstick suddenly found itself inundated with new clients, but because of the contraction it had seen in the months prior, had no capital to support them all, until Facebook’s Invoice Fast Track program provided a solution, Trimiew said.
“Yardstick was able to access the Facebook invoice, fast track program to bring some of the contracts it had signed forward, so it was able to invest in the staff it needed to support that business and it ended up having an incredibly successful year,” he said.
Enabling Access
Facebook’s Global State of Small Business Report published this month underlines the urgency for some small businesses, with access to capital being one of the top concerns for entrepreneurs, Trimiew said.
“A lot of these minority-owned, women-owned, LGBT or disabled-owned companies are having trouble access capital,” he added. “When I was talking to our suppliers last year, when the pandemic hit, many told me how they saw their revenue decline. They talked to me about the importance of being able to access cash so they can continue to invest in their business.”
Facebook’s Invoice Fast Track program began as a pilot last year. The social media giant has partnered with two firms to make it happen, Trimiew said. They include the Detroit-based financing firm called Supplier Success that provides the capital, and a technology platform provider, Crowds.
“Crowds operates the platform where suppliers come and upload their invoices,” Trimiew said. “Once they’re uploaded we validate them, then the suppliers sell them, we buy them and we give them cash. Usually it takes a couple of days and then when the invoice becomes due we will get paid back and then recycle those funds to buy more invoices and support more SMBs.”
You might like: After A Year In Survival Mode, SMBs Are Now Getting Social
Facebook charges a fixed 1% fee on all invoices, which Trimiew said is just enough to cover the costs of the operation. He promised Facebook doesn’t make any profit from the venture, nor does it plan to, he said.
“That’s really not in our vision. We just think that if we can contribute in this way, hopefully we can make an impact and keep some of these businesses going,” he said.
Facebook is planning to contribute in other ways too. In addition to the Invoice Fast Track, Trimiew said the company is planning to launch more product features in the near future that will enable businesses on Facebook to connect with lenders such as the CDFI community to source funding and grants for their endeavors.
“So admins on Facebook business pages will be able to go into this funding resource hub and be able to see the different types of lenders that are there,” he revealed. “We’re curating that, working with community partners again, because we know the challenges that a lot of these diverse-owned businesses in particular face.”
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More