GoCardless tries to disrupt the credit card industry

For small business owners, frustration with credit card companies is nothing new.

“You are a slave to the lender,” said Doris McMillon, owner of a communications consulting business, in a recent Reuters article. “What some of these banks have done to small business owners is unconscionable.”

Luckily for entrepreneurs like McMillon, one UK based startup, fresh with $1.5 million in venture capital, is trying to shake up the credit card industry. GoCardless is building a way for UK businesses to cut out the credit card middleman, and instead allow customers and businesses to deal directly with banks by tapping into banks’ APIs, which were previously reserved only for larger companies and organizations, reports Wired.

GoCardless joins the ranks of companies, like Square and Dwolla, that are trying to challenge and out-innovate traditional payment/credit companies like Visa, Mastercard and even PayPal, which was acquired by eBay in 2002. With the ubiquity of mobile devices, and new technologies like the Square payment system, the credit/debit payment space seems wide open and ripe for innovation.

“As a merchant, card companies are a rip-off and the application process is eye-wateringly complex,” said Matt Robinson, founder of GoCardless in an interview with Wired. “We charge 1 percent per transaction — a step-change cheaper than alternatives. We can do this and still have attractive economics because we’re able to cut out the cost and complexity of the card networks.”

Credit crunch forces small businesses to get creative

United National Consumer Suppliers, a Ft. Lauderdale, Florida broker of clothing, toys and other merchandise for discount stores such as Marshalls, has been seeing more suppliers ask to be paid up front amid worries over the uncertain economy.

But that’s not necessarily a bad thing, said CFO Todd Hartstone, who in exchange for complying can often garner deeper pre-payment discounts.

“We’re going to monopolize on that opportunity,” said Hartstone, whose business has been putting up good sales numbers as consumers seek more bargains from discount stores. “Fortunately having a little cash strength puts you in a position where you can drive the purchase.”

Big banks see slow recovery for small business

Marc Bernstein’s response to reports of loan facilitators advising small business clients to avoid big banks: “It’s simply bad information.”

The head of Wells Fargo’s small business lending initiatives then pointed to the $3.7 billion the country’s fourth-largest bank (by total assets) lent to small firms over the first three months of the year – an increase of 27 percent over the first quarter of 2010.

“That’s not small change,” said Bernstein, who added Wells Fargo is the largest national lender of loans under $100,000 and was recently honored as the Small Business Administration’s (SBA) 2011 Large 7(a) Lender of the Year. “We are trying to do everything we can to get people who apply for a loan approved, but the fact of the matter is that there are a lot of small businesses that unfortunately have been hit very badly by the downturn and are struggling and it’s hard to see how they’re going to handle more debt.”

“Loan doctor” to small business: Avoid big banks

Large banks are making noise about lending more to small companies this year, but financing expert Ami Kassar is still advising his clients to steer clear.

The founder of Philadelphia-based MultiFunding LLC, which brokers loans for small businesses, said his customers stand a better shot at success with regional and community banks.

“As a general rule we don’t get near big banks,” said Kassar, whose firm has arranged 28 deals since launching 15 months ago and has more than 60 others in the pipeline. “The big banks are, in my opinion, full of big talk in terms of their commitment to small business.”

Why America isn’t lending to small businesses

– Jeff Stibel is the chairman and CEO of small business credit rating agency Dun & Bradstreet Credibility Corp. The views expressed are his own. –

The “Great Recession” – the longest since World War Two – will have an even more prolonged effect on the economy if one trend continues: small businesses are unable to secure capital.

Despite significant government stimulus to banks and lending institutions, small business lending is actually down over the past few years. So why isn’t the banking industry lending to small businesses during a period in our history when it’s absolutely essential? The answer has a lot to do with credit-worthiness.