Could multi-draw capital differentiate your platform? Here’s why it helps both you and your customers

Some features are non-negotiable if you’re going to build a capital product that works well for SMBs. The ability to advance funds more than once is one of them (along with payments that fit cash flow and underwriting tailored to small businesses).

After all, things move fast when you’re running a small business, and you don’t always get a heads-up when you’re going to need funds. Unfortunately, a lot of embedded financial products lock customers out of access instead of letting them in.

It’s worth taking a closer look at what multi-draw means, not just definitionally, but what it truly means for small businesses and the platforms that serve them. Let’s use Marcus and his team from Double Shot Café as an example. While they’re fictional, they represent the reality of many small businesses dealing with day-to-day challenges and opportunities. This is exactly who we’re building for at Pipe.

What is multi-draw capital?

Multi-draw gives merchants flexibility by letting them take only the funds they need, when they need them, from a single approved offer without being tied to a “use it or lose it” policy. They’re able to draw from their approved amount as often as needed, until they’ve used it all, similar to a line of credit

Why SMBs need flexible access to capital

Let’s say Marcus was pre-approved for a $100,000 advance limit, based on Double Shot’s revenue and performance. That’s great, but right now he doesn’t need $100,000, he needs $20,000 to update his dining room and do some marketing.

Most embedded capital offerings would leave Marcus with a tough decision. He has an exciting opportunity that could turn a $20,000 investment into meaningful growth. But since the platform only gives him one chance to advance against his limit, he has to choose between taking $20,000 now or advancing the full $100,000 (or somewhere in between).

The problem with single-draw advances

If Marcus advances the full $100,000, his payment schedule will be based on that amount. His average monthly payment will be five times higher than if he had only advanced $20,000, creating serious cash flow problems if the extra $80,000 sits idle.

Advancing $20,000 feels like the safe choice, and that’s what Marcus decides to do. He goes ahead and uses the $20,000 for equipment right away.

Three months later, Marcus has another opportunity: expanding outdoor seating and adding another espresso machine to take advantage of summer traffic. This could have a major impact on revenue for the summer and improve output for the rest of the year. But to seize the opportunity, he has to move quickly.

Unfortunately, Marcus’s capital provider doesn’t offer multi-draw. He can’t access more funds until he pays down 80% of his original $20,000 advance. Some providers require the initial advance to be paid completely before another offer is available. With a typical payment period of around a year, that means Marcus won’t be able to access the remaining $80,000 for at least nine months.

Even though Double Shot had been approved for $100,000 in total, they’re functionally locked out of the remaining $80,000 when they need it most.

How multi-draw capital works in practice

Now let’s cut to an alternate timeline. Marcus is still pre-approved for a $100,000 advance. He still only takes $20,000 to cover his immediate needs.

Three months later, he faces the same summer expansion opportunity. But this time, his payments platform has partnered with Pipe. With Pipe’s multi-draw functionality, Marcus can take exactly what he needs today and come back for more as needed.

He draws an additional $30,000, while still keeping $50,000 in reserve for future opportunities. Where the other provider locked him out, Pipe allows him to lock in his full approval amount while only advancing, and paying for, what he actually needs.

The average Pipe customer advances three times during a 12 month period, compared to once for most competitors.

The business impact for SMBs

It’s not hard to see the difference this flexibility makes for a small business like Double Shot Café. The ability to come back for more funding when needed, and to advance only the amount required without fear of being locked out, is a huge advantage in an unpredictable business environment. With multi-draw availability and new offers automatically underwritten, SMBs have consistent access to capital that feels similar to a line of credit.  

Why multi-draw matters for platforms

But what about platforms? Why should they care about offering multi-draw?

First, customer experience is king. A product that delivers flexibility and fits the realities of SMBs will lead to a happier customer base that’s grateful for reliable access to capital. This is one reason Pipe Capital has a Net Promoter Score (NPS) of 80 across all our embedded partners.

For small business owners, who deal with frequent surprises and tend to have very small cash cushions, access to capital when they need it is a safety net they can count on (and if they need to wait until 6 months after they need it, the holes in that net are too big to be helpful.)

Beyond customer satisfaction, multi-draw just makes sense. Think back to the first scenario: Marcus could have taken the full $100,000 advance, putting his business at risk with excess capital and inflated payments. More likely, he chose the smaller amount. So what happens when a $30,000 opportunity comes up and he can’t access it for another 6–9 months?

Marcus is forced to shop around. He’ll end up at a bank or competitor to get the funds he needs, and there’s a good chance he won’t return to the original platform the next time he needs capital. Instead of building trust and long-term growth, the experience erodes loyalty and pushes customers toward competitors. Multi-draw keeps your customers on your platform and keeps them coming back for more capital as they need it, allowing you to earn more revenue with every advance

What happens next?

Multi-draw lets your customers keep coming back, until they’ve used up their entire offer, but what happens after that? At Pipe, we’re constantly assessing revenue for additional offers, so a growing business has the potential to be offered more capital as they scale, and as they pay down the initial offer, they’re automatically evaluated for new offers. As long as they continue to qualify, businesses have continuous access to working capital, providing a safety net they need for unexpected expenses and opportunities.

Pipe’s advantage: flexibility, retention, and growth

At Pipe, we’ve seen the impact of multi-draw firsthand:

• Outstanding satisfaction: Our NPS of 80 demonstrates how much SMBs value flexibility.

• Proven utilization: The average Pipe customer draws three times in a 12-month period, compared to the single draw allowed by most embedded capital providers.

That means customers are accessing the capital they need, exactly when they need it, and relying on you to provide it. For both SMBs and platforms, multi-draw is a win/win.