Announcing the new SMB Cashflow API

Written by Amelia Chikota | May 10, 2024 12:30:28 PM

We’re excited to release the SMB Cashflow API. This API helps output an SMB cashflow statement in a few seconds using bank transaction data, allowing SMB lenders to more efficiently underwrite, score leads, and provide personalized product offerings.

Why this Matters

Expanding our focus to SMB markets addresses a critical gap: small businesses are often significantly underserved by traditional financial institutions. Fintech innovations, particularly those aimed at SMBs, are now driving the market by offering solutions like payments, lending, and commerce enablement tailored to their unique needs (Alex Johnson has a great breakdown here).

A staggering 80% of SMBs rely on P2P loans, driven by a void in traditional banking services that fail to recognize their creditworthiness due to a lack of conventional credit data. This gap is where nonbank lenders are stepping in, using cashflow underwriting to broaden access for these underserved businesses. Companies like Square are offering more accessible loans to SMBs that large banks typically overlook, especially for minority and women-owned businesses.

Our SMB Cashflow API supports this shift, enhancing risk assessment and fostering inclusivity by expanding access to credit for SMBs. Lenders leveraging cashflow analytics through partners like Pave allows them to effectively to personalize financial solutions based on a business’ cashflows. It’s not just about offering loans; it’s about empowering SMBs to manage their finances proactively, and SMB lenders to better understand their borrowers through detailed, real-time financial insights.

Use Cases

Pave’s SMB Cashflow API is used for:

Lead Scoring: Identify high value customers to be prioritized by sales teams
Underwriting: Make automated loan and payments risk decisions
Personalized Product Offerings: Make targeted offers to upsell additional products

Use Cases we enable on the business owner/personal guarantor side

Underwriting the personal guarantor based on their cashflows and liabilities
Reducing fraud risk by surfacing behaviors like frequent returned payments to flag high-risk users

Use Cases for underwriting the business owner and the business

Determining where your company sits in the debt repayment tier based on a business or business owner’s Liabilities
Identifying merchant cash advances and other types of SMB loans
Developing a cashflow statement depending on what type of business it is (eg. restaurant)
Predicting likelihood of payment on short term advances & loans
Distinguishing between personal income & expenses and business revenue & expenses
Reduce fraud, ACH, and chargeback risk by surfacing behaviors like returned payments to flag high-risk users.

SMB Cashflow Statement

To build a business cashflow statement we’re mapping our tags into 5 major categories:

Income: Sales, returns, interest income, and other revenue sources.
Operating Expenses: Costs related to the day-to-day operations, like rent, utilities, payroll, and supplies.
Investing Activities: Purchases or sales of assets, like equipment or property.
Financing Activities: Loans, repayments, and equity transactions.
Bank Transfers/Assets: activity going in and out to other banks

Here are some FAQs to get you started!

What does the endpoint return?

For each transaction, the endpoint identifies the standard accounting master category (e.g. Operating Expense, Investing Activity, Financing Activity, etc.) and a more detailed category (e.g. Payroll, Rent, Utilities).

How do I call the endpoint?

You can call the endpoint by calling GET /v1/smb/{user_id}/transactions.

Can I see the transactions for a specific period of time?

If you want to see transactions for a specific period of time, you can pass in start_date and end_dates and receive a response with only the transactions between those dates.

View full post