Small businesses SMBs frequently cite cash flow crunches and the struggle to access capital as key hurdles to the success of their business These problems faced by SMBs are also shedding light on supplier payment practices and large corporates strategies of lengthening payment terms to their suppliers in an effort to address their own cash flow crunches There is no shortage of FinTech firms that have emerged since the 2008 financial crisis aiming to facilitate access to small business capital many of which target supplier and invoice financing specifically As the industry grows access to small business financial data is a critical component of risk mitigation and underwriting practices Yet the markets focus on the small business borrower alone may not be sufficient in addressing its cash flow management needs says Diego Caicedo CEO and co-founder of Colombia- and Chile-based Portal Finance The company recently announced a 200 million commitment from BTG Pactual Latin Americas larges financial institution FI The investment signaled Portal Finances dive into bank partnerships adding onto the companys existing strategy of collaborating with factoring companies and large corporate buyers According to Caicedo the decision to work with multiple partners reflects the importance of addressing small business cash flow gaps by not only examining an SMBs financials but looking at that business in the context of its supply chains corporate customers and financial service providers for a more holistic view of its financial position After all with lengthier payment terms a key factor behind cash flow issues for SMBs targeting the payers themselves is a logical step to reaching the small business We found that by helping large corporates de-risk their supply chains with their accounts payable and reconciliation processes we were able to leverage the relationship with their supplier network to reach a large number of suppliers Caicedo told PYMNTS Not only does this provide a low cost of acquisition for Portal Finance working with a single corporate buyer could link the company to as many as 3 000 suppliers he said but tackles small business finance at a point of friction directly Working with a bank like BTG is another spoke in the wheel of small business financing but one that similarly addresses risk mitigation in the market Caicedo said the companys work with BTG is in an effort to provide big corporate suppliers with capital costs that are similar to if they were big corporations In other words more affordable financing Its not possible without access to key financial data and adequate risk mitigation strategy however because offering financing at market rates requires the assumption of default market rates Ensuring small businesses wont default on their financing means not only understanding their current financial positions but understanding how their corporate customers pay their vendors and the data related to how that borrower operates in the market at large Its how they interact with the rest of the market with their employees with other FIs Caicedo explained We can better understand their business at the core than if we were only looking at a little part of their financial statement He continued Everyone says data is the new gold the new oil But what it really comes down to is putting that data together making sense of the data to be able to take it to financial institutions and say Since we have the data you can lower your risk profile We look at the business through the lens of its capacity to generate value Adequate data analysis is key to bridging small businesses with affordable finance and SMBs corporate customers are a significant source of that data However as Caicedo explained this process isnt just about mitigating risk for small business lenders its about mitigating risk in the corporate customers own operations While longer payment terms may be a necessity in a post-Basel III world ensuring the financial stability of ones key suppliers is essential too he said He offered the example of one current customer a large Chilean mining company which relies on suppliers and subcontractors for its key operations If that supplier is not paying its taxes on time not paying its Social Security payments on time not renovating its equipment fleet as it needs to be its most likely going to go out of business he said adding that such a scenario would ultimately blow back on the miner itself Of course the end focus remains the suppliers financial health Though small business financing has seen an explosion in loan products Caicedo said invoice financing is one of the most critical because while a Chilean miner may endure significant harm if a supplier collapses that damage is nothing to what the supplier itself faces This is actually about survival for most of these companies if they dont have the cash to operate he said This is not expansion money theyre using This is operational money