It’s one of the hottest days of 2020 as Colin speaks via an intermittent Zoom connection about the many other ways this year has roasted small businesses, and what his business, SME funding company Penny, is doing to help.

EH: What was the inspiration for Penny?

CG: Penny’s mission is to try and help small businesses win. The thing that stops small businesses has never been their ambition, or drive, or ideas, or even the sacrifices that they make. It’s that even if you do all of that right, you can still not get paid for your talent. That really is the biggest killer for small businesses. To put in all of that energy and talent, and supply all of those services, or build that product, and then not be remunerated for what you do. We saw that this was a massive problem for years. The solution was actually a really simple one. If a small business got paid as soon as they raised their invoices, then it would give them the best foundation to be able to succeed.

I think the current climate has really exacerbated this dynamic. We've got the 4th of July upcoming, which I think is going to be really motivational for a lot of people in the country. We've seen some green shoots over the last couple of weeks, and I think that will be a catalyst for even more. So there's a huge amount of positivity for the economy I think, but it could be a thin veil. There are some pretty significant realities that will come to light afterwards. We've seen a lot of businesses get quite ‘war chest’ about their cash flow. That pressure could get even worse.

Anecdotally, Business A that wants goods or services from Business B. But Business B has to provide the services, wait for longer to be paid and take on more risk. Our mission is to make sure that businesses get paid instantly for the work that they do. Because if that's sure, then everything else about the success of that business is completely in the hands of that business owner. We don't want to see scenarios where businesses have done absolutely everything right, but because somebody wouldn’t pay them they still lost.

EH: What makes Penny different?

CG: First and foremost I think the point is to always be inclusive. What doesn’t feel right is cherry picking whose problem we solve, because that's what makes the most money or that's what’s easiest for us, or gives us the most protection. The whole factoring world only really likes about 10% of the businesses in the UK. It's quite elitist. Businesses will have to be trading for a certain period of time or have a minimum turnover of half a million pounds, and the owners of those businesses have to offer personal guarantees. Is that really the right way? I don’t think it is. So what we’ve done is build Penny to be inclusive and figure out a way to make it work.The technical phrase for what we do do is ‘spot invoice factoring’. You get all of your money now and we take all of the risk in exchange for our margin. We use our tech -our learning engines- to come up with a way for us to be able to provide finance that doesn’t require everything being pinned on the small business. Because it’s just too much.

The last couple of months have shown the best and worst of people. We've seen traditional financiers stop giving cash to small businesses, reducing the amount that they would give people, and charging people more. That’s not the right way. It is if all you’re interested in is making money, but we're interested in really solving this problem. We joke around and say we’re better than a bank because we're actually interested in providing you with finance. We're moving into a world now where things are faster and people have got to have the ability to control their own money. With Penny, we believe that they can.

EH: Why do you use Nimbla?

CG: We were in the process of developing Penny and we thought, ‘We can make this super inclusive if we don't ask the user to take on any risk. But we don't want to be cavalier with risk’. We were talking with more traditional insurers about things like the size of the debtor ledger and the rotation and thought ‘they just don’t get what we’re trying to achieve here’. Then I had a coffee with Flemming (I think it was when you guys were in the Tech Stars building). I didn’t have to tell him where we were trying to go because he was trying to go there as well, except our paths were slightly different. And from that point, everything became a lot easier. We're both trying to help small businesses succeed.

Working together gives us some assurance on the decisions we’re making. It’s a really good partnership. It’s just so much easier when the people that you’re working with, you’re both trying to achieve something similar. There's an incentive to learn from each other. If you just buy lots of individual products, it doesn’t drive a conversation about innovation or change. The world changes so fast. The last 3 months have been an extreme example of how fast it can change.

EH: How can SMEs recover faster after the lockdown is lifted?

CG: In the past 3 months user registrations have been the highest they've ever been. The current situation has highlighted what happens when you think you're getting paid in a month’s time and then you don’t. Your emotions move from anger at not being paid to fear, to the complete devastation of accepting that you won’t be paid, and the impact on your business and your livelihood. Our team has been doing a lot of demos because people are getting equipped for the downturn. They know that they could be waiting a long time for revenue.

A few users have been thanking us because they have been able to use Penny to secure work. If a business wins work they can get paid immediately, and their client is more comfortable because they can push their payment terms out from 30 days to 60 days. People are being innovative with the service to create more flexible relationships between themselves and their clients.

EH: Do you have any tips for fellow small businesses right now?  

CG: One tip I would give would be having a conversation between supplier and client about what the most successful format of this relationship could be moving forward, and having the hard conversation about money. Nobody likes talking about money because it’s crazily emotive. But we all suffer because of that. A supplier and a client could sit down and say, ‘we've gone through a rocky road together. You want services from us, and we want to supply them to you. So can we come to a financial arrangement that works for us all over the next couple of months’.

I think it's about not getting too defeatist about how this has impacted your business, because this has impacted every business. Don't beat yourself up about it, but do use it as motivation and energy to solve the problem.

If you didn't like how you worked with your clients pre-Covid, there will not be a more opportune time to press the reset button on how you work moving forward. Investing in a little bit of change can make a fundamental difference to a business’ success, but also to that business owner’s happiness and wellbeing. It’s hard being a business owner. It’s been super hard being a business owner over the last 3 months. If you can find some tactics to protect your invoices or remove some money worry, you're free to focus all of that energy on how you get your business to bounce back. You can price it into the invoice and not have to do credit control anymore.

EH: How has your business adapted during the lockdown?

CG: We’ve started calling this the ‘time machine effect’, because supply chains are able to buy themselves more time. Users are recommending Penny to their supply chain. I think at the moment it's going to be time to pay that’s critical for a lot of businesses. There’s going to be a lot of cash flow pressure from the end of July and into August. So we're seeing some really interesting moves and changes around that.

This is an opportunity to do things differently. But one of the hardest things for any human really is to do something different from what we did yesterday. Ultimately, if the bridge to cross is relatively simple and you'll be in a better place long-term at the end of it, shake yourself off and walk across the bridge. In six months time, you’ll appreciate the changes you made now.

We often get lost in abbreviations like ‘AI’, but what business really is, is some people who have come up with some ideas so that they can help other people. If they can help them the right way then everyone wins. It’s just that we use tools like machine learning or logistics. I just think that sometimes it's okay to pull back the onion skin, you know -my kids watch a lot of Shrek- and say ‘look, we’re just people trying to do things for other people’. If we solve their problems the right way, people will like it.

Small businesses are all about people. It’s the drive, the determination. They’re not just the CEO, they make the sandwiches, they do everything. That’s why with Penny we ask people; ‘do you want to get paid the same day you raise your invoice? Because we can do that for you.’

October 6, 2020