Pipe Capital: A merchant-friendly cash advance model built to improve capital access for SMBs

Pipe's cash advance model creates several advantages for SMBs, including simplicity, flexibility, and speed. Here’s a closer look at Pipe Capital, how it differs from traditional MCAs, and what it means for business owners and embedded partners.

Simple structure for seamless launches

Our cash advance structure allows for agility and speed, launching faster than a typical traditional loan product. Pipe Capital is built with speed and convenience in mind for both our embedded partners and the small businesses that access capital through their platforms.

One of the major hurdles in traditional small business financing is the lengthy applications and extended waiting periods. Because Pipe Capital underwrites SMBs based on secure, live transaction data, we can streamline the process down to a few simple steps, utilizing data that already exists on the partner platform. The result? Partners can launch in as little as a few weeks, and business owners can access capital in days. 

Merchant-friendly funding for safer growth

We believe companies in the financial industry have an obligation to build proactive policies into their products and protect their customers, whether it’s legally mandated or not. While we’re not a lender, Pipe Capital complies with federal fair lending laws, state disclosure laws, and the full KYB/sanctions regime. Our program maintains robust protection for SMBs, helping our partners deliver high customer satisfaction. This also allows us to keep the cost of capital down, by minimizing risks, making the program more attractive to our capital markets partners. 

In the past, many small business owners have put their business and personal assets at risk, in an effort to secure the funding they needed to grow. At Pipe, we never require personal guarantees from business owners and do not have “confessions of judgment” and other abusive contractual terms some have used to seize assets or freeze accounts with little recourse for the business owner. 

We also work to protect against dangers like stacking by issuing only one advance at a time and monitoring for outstanding financing from another provider at onboarding. Our goal is always to help SMBs access the capital they need, as quickly and sustainably as possible.  

Payments that flex with changes in revenue 

Some MCA providers have given the product a bad name in the past by taking advantage of the flexible MCA payment schedule, with accelerated payments for any contract infraction, which resulted in effective APRs in the hundreds. This is why we’ve worked hard to prevent excessive APRs and have built a product that goes out of its way to help preserve the customers’ cash flow. 

Pipe Capital payments decrease with dips in revenue, with no monthly minimum, protecting SMBs during slow times. With one flat, transparent fee (paid over the life of the advance) there are no surprises, and our hold rates (the portion of the customer’s revenue held back to pay their MCA) are lower than many alternatives—15% or below—preserving cash flow for businesses.  

A cash advance product that equals more capital access

Small business owners and the software companies that serve them often compare the benefits of cash advance products with traditional loans. While there are pros and cons to both, our advance structure makes it possible to give capital access to more SMBs when they need it. 

The primary advantage of traditional term loans is that they can be less expensive overall, often because they’re securitized and offered only to the lowest-risk population of prospective borrowers. Unfortunately, many factors can place immigrant-, minority-, and women-owned businesses in the “higher-risk” categories, locking them out of the financial access they need to grow their businesses to their full potential. 

For example, Black-owned businesses were denied loans nearly twice as often as white business owners, according to  Federal Reserve statistics.¹ Women-owned businesses also have a harder time being approved for loans, even when their businesses are comparable to their male-owned counterparts.²

Unlike traditional financing options based primarily on credit scores and lengthy business histories—which often disproportionately exclude these underserved populations—Pipe’s Capital advance is based on anonymized live revenue data, giving a real-time picture of the health of a business with as little as 3-6 months of history. This allows smaller and younger businesses—many of which are women-, minority-, and immigrant-owned—better access to working capital.

Conclusion

Pipe is underwriting the future of small business with an evolved cash advance model that allows simple,  unbiased financial access to be seamlessly integrated into the tools SMBs use every day. Learn more about Pipe Capital here.

¹ https://www.commerce.gov/news/fact-sheets/2024/06/fact-sheet-us-department-commerce-support-minority-business-enterprises

² https://www.federalreserve.gov/publications/2021-november-consumer-community-context.htm