Bridging the Gap in Small Business Financial Ecosystems: Credit Ratings, Financial Health, and Lending Options

Embedded Partners

Welcome to the SMB Tech Innovators podcast, powered by Gusto, where we explore the intersection of financial services and vertical SaaS strategy and discuss how software combats the rising complexity of running a business. We aim to share stories, advice, and best practices from the leaders and investors behind today’s cutting-edge platforms. In this episode, Greg Ott, the CEO of Nav, shares valuable insights about empowering small business financial ecosystems to manage their financial well-being and gain access to capital.

Highlights include:

  • The challenges and limitations of closed ecosystems.
  • Nav’s unique approach: Championing the open platform model.
  • The critical role of transparency and efficiency in open ecosystems.
  • The importance of building embedded fintech based on customer insights.
  • The debate: Verticalized versus generalized solutions in the business ecosystem.
  • The strategy of consolidation and its potential benefits for newcomers in the ecosystem.

The Future of Small Business Financing Solutions

Greg’s career path has taken him from managing major brands at Procter & Gamble to founding a FinTech company and contributing to businesses of various sizes. He developed a passion for serving often-overlooked small business segments during his journey. At Nav, Greg combines his expertise in understanding customer insights with software development to bridge the gap in the small business ecosystem.

According to the census, there are 33 million businesses in the US. Only 6 million have employees—the other 27 million drive about 25% of the GDP. And so we like to say sole proprietors are people, too.

Greg Ott, CEO, Nav

Understanding the Small Business Landscape

Nav’s mission resonates with the vast segment of small businesses where owners are essentially the jack of all trades, balancing between executing core business tasks and managing the broader operational aspects. With a focus on businesses typically up to 20 employees, Nav aims to alleviate these owners’ overwhelming responsibilities. Ott emphasizes the significance of reducing the cognitive load on small businesses to facilitate their growth and sustainability by enhancing efficiency and transparency in the ecosystem.

The Power of Nav’s Offering

Nav functions for small businesses are at its core, consolidating data from over 70 lenders, numerous credit cards, and various insurance providers across ten categories. Gregg points to Nav’s role in aggregating the supply side and streamlining the process of accessing and managing capital efficiently. Additionally, Nav’s recent launch of Nav Prime introduces light banking tools and a card that reports transactions to credit bureaus, aiding businesses in improving their financial health and qualifying for better financing options.

The Challenge with Embedded Lending

Embedded lending is a promising trend that Greg finds intriguing. It’s where I first began exploring the possibilities of data portability and integrated solutions. However, it presents a significant dilemma. On the one hand, it offers the convenience of readily available financing options, similar to the emergence of ‘pay later’ options. However, for small businesses, the lack of transparency regarding their available choices is a crucial factor. They need to know if there is a better or cheaper financing alternative elsewhere.

Embedded lending focuses primarily on providing financing right at the point of sale, like point-of-sale financing. However, it needs to offer more transparency for businesses to determine if this is their best option. The real strength of embedded lending lies in its efficiency, but there’s a fundamental flaw—it’s often tied to a specific ecosystem. A single lender rarely caters to the entire credit spectrum in small businesses.

Insights into Small Business Credit Dynamics

Small business lending differs from consumer lending, involving various factors beyond personal credit scores. Greg has highlighted the complex evaluation process, which includes analyzing business credit scores, cash flow, and financials. Nav plays a key role in simplifying this intricate process by providing insights into the eligibility criteria and offering solutions to improve the financial profiles of businesses.

The Nav Approach: An Ecosystem of Solutions

Nav’s business strategy focuses on serving the financial needs of segments that are under-represented in the market. Greg explains that Nav is not limited to lending solutions; it offers a range of financial products and creates new solutions to address gaps in the market. This approach fits well with Nav’s mission of providing transparency and efficiency while catering to specific segments that need to be served better by existing financial solutions.

Small businesses often operate with limited financial resources, which makes it essential for them to have easy access to capital.

Greg emphasizes that transparency and capital availability are vital for these businesses’ survival. Nav aims to cater to the specific needs of this segment by offering loans averaging less than $50,000, a niche that traditional banks often overlook. By doing so, Nav is bridging the gap between money going out and money coming in for small businesses.

The Open Ecosystem Advantage

Greg is a proponent of a open small business financial ecosystems, contrasting the closed ecosystem approach favored by some industry giants. Although closed small business financial ecosystems offer convenience, they also run the risk of excluding a large portion of businesses and limiting their financing options. On the other hand, an open ecosystem, such as the one embraced by Nav, caters to a broader audience and aligns with diverse small business needs.

Navigating Innovation in the Small Business Realm

Greg offers advice for emerging SaaS platforms, emphasizing the significance of customer insights and scalability. Understanding the unique needs of specific segments and planning for scalability in the constantly changing small business landscape is critical. He suggests using scale as a competitive advantage and innovating around efficiency for small businesses, focusing on streamlining workflows and enhancing access to capital.

Conclusion: A Holistic Approach to Financial Empowerment

Nav’s strategy, constructed on customer insights, an open ecosystem, and varied financial solutions, strives to enable small businesses by streamlining financial intricacies, enhancing access to capital, and encouraging growth prospects. 

Greg’s Advice:

  • SaaS platforms need to identify unique customer insights, emphasizing the need for scalability and a focus on efficiency for small businesses.
  • Nav’s strategy of embracing an open ecosystem aims to serve a broader audience, offering transparency and diverse financial solutions for different business needs.

Listen to Discussing the future of small business financing solutions with Greg Ott. Learn more about Nav and connect with Greg on LinkedIn.

Brian Busch Brian is currently Head of Marketing at Gusto Embedded; the only payroll API with 10 years of experience and actionable data behind it. Before joining Gusto, Brian held leadership positions at Cloud Elements, Kapost, and Captricity. He holds a BS in finance and a BA in philosophy from Boston College and an MBA from the Cal Berkeley Haas School of Business.
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