Entrepreneurship is a key driver of economic growth, stimulating competition, creating jobs, driving convenience, and bringing new products to market. Start-up rates are rising, with likely business applications growing in all 50 states over the past three years. Financial technology – or fintech – is a major part of this success story. While legacy financial institutions have historically prioritized serving established businesses, fintech is stepping up to serve the startup and innovation economy, which in turn powers Main Street. Fintech helps founders raise and manage capital, accept digital payments, handle expenses more efficiently, and set up a bank account in minutes rather than days.
Expanding Access to Funding to Launch a Business
The barrier: The biggest challenge for many founders is accessing capital to fund their ideas. Traditionally, the startup industry operates within tight-knit circles, resulting in outsiders struggling to gain visibility and credibility. Outdated definitions of an accredited investor currently limit the opportunity to fund an early-stage startup. As a result, entrepreneurs face extensive barriers in getting their ideas off the ground.
The fintech solution: Fintech companies support the innovation economy and make it easier for entrepreneurs to access venture capital, manage equity, and streamline processes.
- Carta provides entrepreneurs with a suite of products to seamlessly manage their fundraising, communicate with investors, offer personalized equity options to employees, and track ownership all in one place. Carta Classroom is an education center to help entrepreneurs learn how to get started, build a team, fundraise, manage a cap table, taxes, and more.
- Mercury Raise helps connect founders to active investors (over 3,000 intros made to date), provides educational resources to founders, and hosts a Slack community where founders can connect with their peers. It’s a year-round program that provides the startup community with direct access to the tools and connections they need to succeed.
The next step: Investing in a high-growth startup should not be limited to the wealthy and well-connected. Expanding the definition of an accredited investor – through legislation like H.R. 835, the Fair Investment Opportunities for Professional Experts Act – would allow more Americans to invest in early-stage startups.
Navigating Legal and Regulatory Requirements
The barrier: Navigating legal and regulatory requirements can be overwhelming for entrepreneurs starting a new venture, as they must choose a business structure, register with authorities, evaluate tax implications, and obtain permits and licenses. This is especially true for digital businesses, which must comply with regulations across states and tax jurisdictions.
The fintech solution: Fintech companies guide entrepreneurs through the complex federal, state, and local regulatory requirements and help streamline business formation and compliance requirements. These tools are often out of reach for new businesses underserved by traditional financial institutions.
- Carta and Stripe Atlas provide tools to set up the proper business structure for the unique needs of a new venture, such as ensuring regulatory compliance, handling tax filings, and simplifying the incorporation and growth process for entrepreneurs.
The next step: Congress should enable electronic filing for key tax forms like the annual 1099 and Section 83(b) elections. Simplifying these filing processes by passing legislation like H.R.2611, the Eliminating Paperwork for Startups Act is crucial to helping entrepreneurs efficiently manage their ventures.
Expanding Access to Working Capital to Grow a Business
The barrier: More than eight in ten entrepreneurs struggle to access bank loans. That’s because legacy financial institutions have largely ignored entrepreneurs, which can be expensive and time-consuming. As a result, there is often a missing middle of high-growth businesses that lack access to working capital to grow their companies.
The fintech solution: Fintech companies have stepped in to serve the missing middle. By leveraging technology, fintech companies expand entrepreneurs’ access to working capital through innovations like cash-flow underwriting and revenue-based financing. These funding opportunities make it possible for companies to grow at critical stages in their life cycles.
- Forward Financing, Intuit, PayPal, Pipe, Stripe, and Square enhance founders’ access to capital with simple digital applications, finance offerings based on the overall health of an entrepreneur’s business, and flexible payment options based on the business’s unique needs.
The next step: Pursue policy initiatives that make it easier for entrepreneurs to access capital via innovative digital financial technologies in a streamlined manner at critical business inflection points. This could include the Small Business Administration issuing additional lending company licenses to alternative financing providers.
Streamlining Business Banking and Operations
The barrier: Traditional business banking can be inflexible, with high fees and strict requirements like minimum balances that strain early-stage finances. In fact, 70% of entrepreneurs admit to using their personal credit cards for business expenses. As a result, entrepreneurs often lack access to tools to manage their banking and financial needs all in one place. Juggling different services makes it difficult for entrepreneurs to accurately understand their business’s overall financial health.
The fintech solution: Fintech companies provide banking solutions that turbocharge entrepreneurs on their journeys rather than holding them back. Fintech solutions often offer a suite of services all in one place, from banking built for start-ups to business operations tools for accounting, expenses, invoices, and more. Streamlining administrative tasks and automating processes enables new ventures to operate efficiently, quickly determine their financial health, and focus on growth.
- Bluevine, Intuit Quickbooks, Mercury, and Ramp provide an all-in-one platform for business checking and savings accounts, corporate credit cards, financial workflows, bill pay, invoicing, vendor tracking, expense management, and real-time spending reports. Integrating these services all in one place enables entrepreneurs to focus on growth rather than administrative tasks.
The next step: Congress should put the financial tools for success in the hands of entrepreneurs by passing legislation like S. 2330, the Small Business Technological Advancement Act, which would clarify that entrepreneurs may use the Small Business Administration (SBA)’s 7(a) loan program to pay for tools that support daily operations, including inventory management, product delivery, and accounting systems.
Meet the Entrepreneurs Using Fintech
- READ: Find out how Bluevine supports entrepreneurs with an all-in-one banking platform.
- READ: Explore how Carta’s fundraising tools have helped countless entrepreneurs raise money to start and grow their ventures.
- READ: Dive into these eBay seller stories.
- WATCH: Hear directly from entrepreneurs about how Forward Financing helped their businesses thrive.
- READ: Discover how Intuit QuickBooks has empowered entrepreneurs on their journeys with tools that help streamline operations, manage finances, and fuel growth.
- READ: Take a look at the ambitious goals entrepreneurs are working toward while banking with Mercury.
- WATCH: Learn how Pipe partners with software platforms to offer customer-friendly capital and financial tools to their SMBs.
- READ: Browse the businesses that manage their finances – saving time and money – with Ramp.
- WATCH: Learn more about the entrepreneurs who use Stripe’s platform to obtain capital and start and grow their businesses.
- READ: Check out these customer testimonials on finding new ways to innovate and scale with Square.