Ebb and Business Cash Flow: Some Do's and Don'ts

Ahead of Small Business Week in May, FOXBusiness.com is running a special Growing Your Business series. Here is expert advice and insight for entrepreneurs from Darrell Esch, PayPal's vice president and general manager of business lending solutions.

“Uneven cash flow is a top challenge for small businesses,” said Darrell Esch, vice president and general manager, business lending solutions, at PayPal. “I often hear from small business owners that they hadn’t considered how loan repayments might impact their cash flow.”

Esch is an expert in business financing solutions, specifically those in the fintech arena. He currently oversees lending activities for small- and medium-sized businesses utilizing the PayPal Network. Before joining the online payment provider, he spent nearly 15 years at Bank of America, where he served, among other areas, as general manager of the business lending unit and head of business credit/debit products.

FOXBUSINESS.COM: What are the top three ways that fintech is changing the way small businesses operate?

Esch: Reducing barriers to entry. Providing access to capital for growth and hiring. And enabling cross-border commerce.

FOXBUSINESS.COM: Can you speak more on how fintech reduces entry barriers, and how does this relate to cross-border commerce, and by proxy, growth?

Esch: Many small businesses have difficulty getting approved to process credit cards, and for others, the setup can be daunting. Fintech companies …  allow small merchants … to do so with ease both online and in-store.

For a long time mom-and-pop retailers were bound by brick and mortar, but fintech has opened up their storefronts to the world. Small businesses can now sell globally and reach more customers without setting foot on foreign soil, with products and services that help them to generate consumer demand, drive conversion and manage logistics.

One way small businesses can grow is by optimizing their website for mobile. Shoppers are moving to mobile in droves, and businesses risk missing out if they don’t adapt. According to Forrester Research, an independent technology and market research company, mobile commerce will represent more than one-third of online transactions in 2016.

FOXBUSINESS.COM: How do fintech companies provide capital differently to small businesses or entrepreneurs?

Esch: While lending to large firms has rebounded relatively quickly from the Great Recession, lending to small businesses is down approximately 20 percent over the same period. Fintech companies … are filling the gap by leveraging technology and data to provide small businesses access to the capital they so desperately need to grow and hire. Through these new, technology-enabled financing solutions, applications can be simplified, credit assessments can be conducted in short order using objective criteria, funding can be disbursed in real time and repayment schedules can be adjusted to the individual business’s situation.

FOXBUSINESS.COM: How can small business owners be smarter when it comes to borrowing and capital?

Esch: Small businesses need to make sure they understand the terms and conditions of any lending service and choose the one that’s right for their situation. In particular, they should consider how they will make payments when business is slow so they don’t get locked into a payment schedule they can’t keep up with down the road. PayPal Working Capital payments are applied automatically as a fixed percentage of daily sales that the business selects in advance – meaning business owners pay more when business is strong and less during slower times.

FOXBUSINESS.COM: What is the single biggest mistake you often see small business owners making that could be easily fixed, and how would you fix it?

Esch: The biggest mistake I see small business owners make is putting the customer last. It doesn’t matter how amazing you think your product, service or concept is: If it’s not on par with what your customers want, they’re not going to buy, and you’re never going to be successful. You already know you need customer feedback before your launch. But don’t forget about continuing to talk to customers after launch. … I make a point to talk to our customers regularly to find out what we’re doing right and where we might be falling short. It’s these insights that keep our team focused on what really matters.