Small-business owners constantly deal with what seems to be an infinite set of circumstances that affect their business. Today, it seems like tariffs, dips in the market and tax changes are some of the biggest topics of discussion. Tomorrow it could be something else.
Capital One works with a large number of business in a variety of ways. The company is probably best-known for its small-business credit cards but it also offers small-business loans, business banking and more. Given the variety of services it offers and the different touch points it has with the market, it’s more than well-equipped to run a pulse check on the market to get a sense of major concerns and patterns. In addition to questions on market trends, we asked about possible incoming innovations with their financing products such as rewards programs with their business lines of credit or other larger financing tools. However, their Head of Small Business Lending, Iskender Eguz, stated that while those kinds of features are common with credit cards, we shouldn't expect to see similar features with their other debt financing products.
We had the opportunity to sit down with Capital One's Jenn Garbach, Head of Small Business Card Brand, to talk about her point of view of the small-business market and recent findings from Capital One's Small Business Growth Index.
This interview has been condensed and edited for clarity. If you're a small-business owner interested in sharing your story, tweet us at @ValuePenguin.
Jenn, could you tell me a little bit about your background?
Absolutely! I lead brand and marketing for Capital One small business cards. I’ve been with Capital One for over six years. Spent time across the retail bank as well as the card organization, in a variety of roles across our card and marketing organizations. Right now we’re very much focused on growth opportunities in the brand and marketing space for the small-business cards organization.
Is the winter holiday season typically the busiest time of the year for all small businesses?
We see a lot of seasonality. It’s definitely a very busy season, as you would expect, for retail, but depending on the industry we’re in, and geography and whatnot, we see a lot of industries that see their seasonality at other times of the year. If you think about construction, for example, where folks are doing a lot of things in the springtime, or just based on weather geographically. It’s not an across-the-board lift for all of our businesses, but most predominant in the retail space.
What are some of the most surprising things Capital One has learned across the wide variety of clients that you have worked with?
Most surprising? I actually think one of the things that is probably most surprising, or re-hits us every year, is the realization that in the small-business space, a lot of the technology and processes haven’t actually caught up with the state of technology, as you would expect in the consumer space. I think both are results of, service providers in the small-business space tend to lag in some of the tech adoption for small businesses, compared to consumer. Secondly, we just see a bunch of antiquated processes. There’s a way things have always been done. If you think about the number of small businesses that are writing paper checks as opposed to using digital payment methodologies or implementing new tech, that’s a real opportunity. It’s a place where Capital One continues to lean in on our tech and innovation agenda, to differentiate and meet the needs of small businesses. It’s a really interesting dynamic that definitely is notably lagging what we see in the consumer space.
How do you help your customers understand that debt financing is actually a much more reasonable and reachable form of financing compared to the massive rounds of venture capital they'll see in the news?
One of our roles is to help small businesses really understand the needs of what they’re trying to accomplish as a business, and where different types of lending or financial instruments are most impactful to help drive their business. We stand in a position to really help them, from cash flow management points of view, as well as looking at the incremental value add that comes with a number of our products. The services that we offer in terms of, not just your ability to help manage your cash flow, but … We have employee cards; an extension of the power of taking on that debt is being able to distribute it to the folks in your business who actually need to spend that money to grow and manage your business. So, helping them understand beyond just the, “you need access to capital.” It’s: What else are you trying to accomplish on a day-to-day, managing and growing your business? How do our products, and the services that come with those products, actually help better empower you to do that than necessarily just cash alone, in some cases?
What are some of the biggest benefits of credit cards that you don’t see customers using enough?
A couple of things, and some of these are fairly unique to Capital One. The first is: We offer some great integration with accounting software. If you think about the power of not only using your credit card, but actually integrating that into your core financial management software and really understanding automating some of the invoicing, being able to harvest all of that data and feed it directly into your accounting software—so it is easier to manage where that is going, do your tax preparation and whatnot; I think that’s one major benefit that we see. You heard me earlier reference employee cards; I think that’s another great benefit of understanding that either at a point in time, or as your business grows. … And we saw through the Small Business Growth Index that more businesses are planning to hire in the next six months, and so as they bring on new employees, the power to equip those employees with employee cards and be able to set spending limits, and really help manage that so you’re both empowering them but also retaining an element of control and visibility over what’s happening there. And also just the use of re-investment of rewards. I think that’s one of the best value props that we offer through our Spark card—learning from customers how they’re able to harness the rewards, either to re-invest in their business or use it personally—I think that’s a really underutilized benefit sometimes. They're not just nice-to-haves; they can actually be massive enablers of your business. We’ve seen that from a number of our customers, in how they’ve put those rewards to work for them.
Turning to the Small Business Growth Index survey; we saw that optimism about small-business conditions is down about 6% compared to last year, among women specifically. Is there any idea as to what’s going on there?
From the survey itself—as it surprises you to see that—that was one of the early reads we got that was kind of a, “Hmm!? We didn’t expect to see that.” We don’t, through the survey, have a lot of proof points behind that one. As we go back out knowing that the Small Business Growth Index is an annual survey—we always go back with the standard questions as well as topical ones—that’s a prime topic that we’re going to go back to, to probe on and try to better understand what’s really behind that.
Of those 33% of businesses that feel these new tariffs are going to affect their business, are there any general measures they can take to help reduce some of that negative impact?
Our guidance to small businesses who are looking at trying to really understand that, is to make sure that folks are reaching out to their accountant or financial services expert to help understand the specific implications for their business, because that impact varies by so many different factors. I think what we’re seeing is, that decrease in optimism of how tax reform is going to impact them specifically is coming as they dig in further with their accountants or financial adviser. So our best advice to folks is really, this is a great time to reach out and understand what the impact is going to be to your business.
Taxes are a big issue for small-business owners, and from the looks of your survey it's great that a lot of business owners plan on meeting with professionals to discuss incoming changes. Is there anything else they should be doing to best help prepare?
I’d go back to one of those great value-added services that we provide: Looking at that accounting software integration. I think you’ll find that there are a number of ways we can make that information more accessible and more digestible, and sometimes it starts with getting it into an easier format, and some of the pain points of even getting to an accountant or figuring out if that’s the right route for you is just getting that information in one place. I think that’s a really powerful way of easily aggregating all of that information in one place. Pretty painless to get that set up; and it equips you to say: What am I actually looking at here? Am I in a position to take action on this myself, or do I want to bring in an accountant or financial adviser specialist to help me decide what I should do from here?
I thought that an interesting find was that there’s a pretty big difference in the general philosophy of millennial business owners versus business owners from other age groups, like baby boomers. Were there any dangerous or red-flag findings that stuck out to you from the different philosophies people employ?
I don’t think these are red flags. I think about what could be behind some of that increase in optimism. The types of things I’m thinking about are: Again, if you look at the age range for millennials, a good portion of that population entered the workforce either during or just following the last big recession, and so we may see a bit of an anchoring factor happening there, where folks remember things when they were worse, and ergo things can only go up from there. There’s also an element around, millennials were largely born with technology. Whether that’s just more innate to them, it’s the way that they work, and so they’re more willing to incorporate it and take some of the bigger risks around making investments in technology. I think that could be some of the drivers behind this. But again, it’s another place we are likely to dive back into as we go out with the next version of this survey.
Was there anything that stuck out to you most, personally, from the survey?
The millennial optimism was definitely one that stuck out to me. What else hit me overall? I was really happy to see that folks are feeling more optimistic about hiring plans. I think we’ll continue to see challenges in the tight labor market. It is an interesting conundrum: Folks are feeling more optimistic that they are likely to hire in the next six months, but given low unemployment, we’re going to see a tighter labor market and small business are going to be competing for those resources. They continue to also be exacerbated by the skill gap, and finding the right resources, or the folks with the right skills to fit those roles. I think it’s a great sign of optimism that they’re thinking they’re in a position to hire, but there’s a bit of a disconnect in terms of some of the challenges they’re going to face in crossing that hurdle.
What're some specific areas of the market, or key trends, that you’re keeping an eye on? Or would recommend that small-business owners closely monitor in the next few years?
There are a couple things that we have our eyes on specifically. The first is the continued digital and technology push. As folks are increasingly on the go and wanting to have access to information at their fingertips, we’re continuing to look at the prevalence of smartphones, and folks, particularly in the small-business space, looking to move some of their workflow onto mobile devices. Again, to my prior comment, in some places you see technology lag, we’re looking to push our initiative of creating easy access to our products and services on mobile and digital devices. Also, just knowing that folks are increasingly putting more spend on their cards. We’re thinking about how we can better provide access to higher credit limits. We’re continuing to explore some new tools and products that are going to make access to higher credit lines more accessible to small businesses. With that, the visibility into credit line and dynamic understanding of whether they have the ability to make purchases on a real-time basis. So looking to bring as much real-time and visibility to that process as possible, while equipping small businesses with the credit lines that they’re asking for to power the day-to-day mechanics of their business.
Any last minute advice for our readers?
I’m probably repeating, but just again: I’d go back with the Small Business Growth Index being a recurring survey. We’re really interested to come back and follow up on a couple of those key topics that you talked about. We’ll continue to ask around things like the impact of tax reform and other policy changes. It’s really interesting to see if that hiring trend continues, or that optimism, over time. We’re going to continue to push in on a bit of that millennial and the gender issues that you saw tease out there.