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Capital One launches new flexible payment options for small business customers

  • Cash flow problems are among the biggest challenges facing small businesses, particularly during the pandemic.
  • Payments startup Melio will provide access to accounts payable and receivable cash flow management tools for Capital One’s SMB customers.
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Capital One launches new flexible payment options for small business customers

Capital One is bringing flexible payment options and improved cash flow to its small business customers by enabling them to make credit card payments even where they are generally not accepted.

Through a collaboration with B2B payments startup Melio, Capital One’s small business customers can now pay their bills via credit card to vendors all across the U.S., including those who prefer direct bank or wire transfers, as well as paper checks. Melio pays these vendors using their preferred payment method without requiring them to open a Melio account.

Capital One’s small business customers get a discount on all credit card purchases in the first year after signing up for the service. Alternatively, they can choose to pay their bills online for free with an ACH transfer or debit card. 

Since its inception in 2018, Melio has raised $256 million from investors including Coatue, Accel, General Catalyst, Aleph and Bessemer. Earlier this year, the firm closed a $110 million funding round to reach a valuation of $1.3 billion. 

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Capital One Ventures, the bank’s corporate venture capital arm, has joined Melio’s Series C funding round with a strategic investment. Aman Sharma, partner at Capital One Ventures, says it’s important to help small businesses maintain access to the full range of digital solutions required to meet their day-to-day needs.

“From the outset, we were impressed with Melio's ability to execute a strategy aligned with its mission to keep small business in business,” said Sharma. “Matan and his team recognize that cash flow is the driving force behind small businesses, and B2B payment capabilities should be built with simplicity and ease of use as the core principles.” 

Cash flow problems are among the biggest challenges facing small businesses, particularly during the pandemic. 6 out of 10 small business owners report that they regularly struggle with cash flow, according to a recent report by QuickBooks.

“Small business owners want control over their payments, and they shouldn’t have to pay high costs to get it,” said Matan Bar, Melio’s co-founder and CEO. “With Melio, businesses can choose how and when to pay and get paid, for example by using a credit card even if suppliers don't accept card payments. The suppliers can receive their payment any way they choose, including by paper check or bank transfer.”

Bar says Melio’s monthly active users grew by 2000 percent last year, which indicates the high demand that small businesses have for flexible payment options and better cash flow management tools.

Any payments solution that reduces point-of-sale friction for consumers is a good thing for small businesses, according to Brian Martucci, finance editor at Money Crashers. “Optimizing cash flow is a constant struggle for small businesses, especially low-margin, high-sales-volume enterprises that depend on fickle consumers for survival,” said Martucci. “Payments solutions that help businesses optimize cash flow without resorting to high-interest loans have tremendous potential.”

Alex Williams, chief financial officer of online shopping research platform FindThisBest, says his company recently began operations, and relies on a consistent dose of cash flow to stay afloat.

“As a small business, it becomes a hassle when some of our vendors take only cash while others accept only credit cards,” said Williams. “It’s a chore having to reconcile our credit card statements with our bank statements and withdrawals every month.”

Williams says a platform like Melio’s could help small businesses grow, become more financially savvy, and create better opportunities for themselves. “If what Melio aims to do can become a real possibility, I'd sign up instantly,” he said.

“As long as they’re able to keep their pricing structure at an affordable rate, I think there's a huge market for them to expand into.”

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