Novo on Helping Sole Proprietors Survive and Then Thrive With Faster Payments

Many United States consumers are living paycheck to paycheck with less than $1,000 in savings to help them weather a financial emergency, according to Grant Sahag, vice president of operations at FinTech Novo.

This lack of resources presents not only serious financial challenges to those individuals but also significant mental and emotional troubles. Some are responding by starting small businesses and generating their own paychecks. Unfortunately, in the early stages of going it alone, the same factors of financial uncertainty are compounded by the added stress of meeting business financial obligations. For these self-employed workers and sole proprietors, faster payments can be the difference between a small business that prospers and one that never gets off the ground.

Sahag said he has heard many stories from sole proprietors and single-member limited liability companies (LLCs) that are dealing with the same uncertainties about monthly bills and personal expenses that paycheck-to-paycheck consumers face. Novo Boost, the FinTech’s fast payments solution tailored to small businesses, works primarily with entrepreneurs as they take their first steps toward building a business. In many cases, these businesses are often side gigs that owners are looking to evolve and grow into their full-time income.

“As much as they’re not considered consumers from a regulatory perspective, they act like consumers,” Sahag said. “They’re looking to make sure they can pay their kids’ college bills. They’re looking to make sure they can pay their electricity bills.”

Relieving the Pressure on Sole Proprietors

While consumers face the same kinds of economic pressures, sole proprietors face an additional layer, as they are responsible for keeping their own jobs afloat. Access to faster payments can meaningfully provide them with peace of mind, Sahag explained.

“When we survey customers, over 40% of them reference the fact that faster payments — faster access to capital — allow them to feel comfortable, knowing that they’ll be able to pay their [contractors] and make [it to] that next step of potentially hiring their first employee, and then also actually get those employees and contractors money faster,” he said.

Novo Boost targets entrepreneurs on the cusp of either making their business their full-time job or scaling a business that employs only the owner into a business that employs multiple people full time.

“That confidence interval is critical to both short-term and long-term planning around the business,” Sahag said.

Faster Payments: A Lifeline for Small Businesses

Financial health in the current economy is often a matter of sheer survival for the self-employed. Although the term is paycheck to paycheck, they are often living bill to bill, and reducing the amount of late fees they are paying can be critical. The boost they get from being paid faster can serve as a major lifeline.

“You start to hear it in their voices,” Sahag said. “They say things like, ‘It reduces my stress.’ They talk about how [having] more money in their hands quicker helps them sleep at night.”

Sahag added that receiving a payment two days sooner than legacy methods would typically allow can make a tremendous difference for business owners living bill to bill. This positive impact trickles down, as many of the businesses that sole proprietors are paying are themselves small businesses in similar financial circumstances. When payments can move faster for one business owner, the improved speed cascades around the community.

“These are not trivial things,” he said. “These are people that are affected; these are families that are affected.”

The Next Frontier

In its current form, Novo Boost is focused on making transfers to small-business owners happen faster, Sahag said. Novo’s next major focus will be helping those owners disburse those funds faster as well. Receiving money into a bank account faster is only half the puzzle, and being able to send that money where it needs to go just as quickly will further benefit Novo’s customers by granting them even greater control over their cash flow and adding predictability to an uncertain time.

For those customers, payments are critical to both financial and mental well-being, and the U.S. payments system is just starting to catch up by helping them gain better control over their finances, Sahag said. For the smallest businesses, faster payments already can provide meaningful relief from financial stress, and every future improvement to transaction speed has the opportunity to have its own vital positive impact.