Reputation Matters: Customer Sentiment Tracking Extends Credit Opportunities to SMBs

Small businesses fail all the time, but it’s not always because they’re bad at doing business. In fact, in many cases, it’s more bad luck than anything else, with cash flow problems causing many thousands to shut up shop — simply because they don’t have the funds to pay their bills on time, regardless of their actual financial health.

So it follows that a lot of failed businesses could have stayed in business if they were somehow able to gain access to the money they needed to keep their wheels greased.

“Most small businesses fail because they cannot unlock access to credit,” said Nuula Chief Executive Mark Ruddock in an interview with PYMNTS. “There are a lot of great businesses that failed, simply because at that moment they couldn’t unlock the credit they needed.”

Nuula is looking for better ways to help those small businesses gain more opportunities to obtain funding during those crucial moments. To do so, it’s combining traditional credit profiles and cash flow data with more nuanced information that provides useful insights into how a business is doing.

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“We want to look at reputation, and whether or not customers are coming back to that business,” Ruddock explained. “We also look at core financials and their Shopify and payments data as ways of triangulating and inferring the health of a business. If you’re going to unlock credit for small businesses going forward, you need to kind of underwrite them in the moment.”

Nuula’s mobile app, which launched in June, offers real-time monitoring of cash flow, personal and business activity, and ratings and reviews on social media, letting business owners know right away if there’s a cash, credit or reputational issue that needs their attention.

This combination of insights means business owners can keep track of both their finances and customer sentiment in a single app. That’s important, Ruddock said, because the vast majority of SMB owners find themselves swamped with the day-to-day demands of running their business.

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“Most entrepreneurs spend 125% of their time on the customer-facing aspect of their business and negative time on the metrics behind the scenes,” Ruddock noted. “The danger of doing that is things can go bump in the middle of the night, and that will have a knock-on effect on your ability to raise capital.”

A negative review on a site like Yelp might go unnoticed by a business owner for some time, causing enormous damage if it puts customers off from frequenting the place. And that dent in their business might make the difference when it comes to applying for credit. So Nuula helps to monitor what people are saying and alerts business owners to anything negative so they can immediately take action.

“In doing that proactively for them, we are letting them focus on their business and tapping them on the shoulder when there are things they need to know,” Ruddock said. “It’s a trade-off that allows us to develop a more nuanced understanding of those businesses, which we can use to help them unlock credit.”

Not only will Nuula unlock that credit, but it will also be the one to provide it. Ruddock gave away some exclusive details of an upcoming feature in the app – an integrated line of credit he likened to having “cash in the cloud” – that will launch in limited beta in the next couple of weeks.

As Ruddock said, Nuula will determine how much credit a business can realistically afford to pay back – based on its financials and other insights into the health of the business – and then make it available instantly, so the business can tap into it whenever it’s needed.

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“You can take it out whenever you want it. You put it back whenever you don’t need it, and you only pay for the days that you have the cash,” he explained. “So you can literally take $10,000 out for five days to make payroll in the event that a customer hasn’t quite delivered their payment on time, then you can put it back after five days, and you only pay for the days that you have the cash.”

The terms of the loan are fully transparent, with a flat charge of $1 per day for every thousand dollars borrowed. “So $10,000 for five days will cost you $50,” Ruddock said.

Nuula’s integrated line of credit will be the first of several new offerings. Ruddock refrained from using the term “super app,” but his plans suggest that’s exactly what Nuula is building. He said his long-term vision is to provide an entire suite of financial services products for small businesses, providing easy access to much larger loans, affordable insurance and other offerings, via an ecosystem of FinTech partners.

Ruddock said the company has already identified two partners that will enable it to launch much larger loan services of up to $1.5 million to customers in the U.S. and Canada.

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“We’re specifically looking for FinTechs that are re-imagining their respective sectors to bring them into our ecosystem. Then we give them the ability to surface within the Nuula app the day-to-day transactions that people will want to complete with their product,” Ruddock said. “So you can actually do all of it within Nuula, and it becomes the one app that every entrepreneur will want to use every day.”

Ruddock told PYMNTS his biggest hope is that we’ll see an acceleration of the concept of open banking, which refers to the process of banks and other financial institutions making their data available through APIs for regulated providers to access, use and share.

“My big wish is to get access to that data and then twin it with companion data that’s available by API,” he said. “A broader pool of data with the right algorithms on top creates a tremendous opportunity for innovation in the FinTech stack.”