In the explosive world of financial technology, a handful of relatively new companies are scrambling to fill a big hole by issuing company credit cards to young tech start-ups and entrepreneurs who can’t get credit elsewhere.
While the firms are affiliated with the major credit card companies, they operate a bit outside of the traditional banking system and finance clients with high growth potential and little or no credit histories.
They keep a keen eye on their bank accounts and warn them: If your account runs low, your credit is gone.
The companies, many of them start-ups themselves, provide easier access to corporate credit cards with higher credit limits, little or no personal liability to founders and fast approval. Some offer points redeemable for future travel or products, others small cash refunds.
Using technology, they not only monitor their clients’ spending habits and accounts but also furnish guidance, set parameters for individual employees, and require monthly payments in full. Among other revenues earned, they typically take a cut off each client transaction.
Pledges to save money
One of the credit card companies is RampOpens a new window , which stresses that its edge is in the savings it can offer rather than rewarding wasteful spending by doling out points. It is gives clients special Visa cards.
Ramp, whose founders Eric Glyman and Karim Atiyeh sold their last venture to Capital One, was launched earlier this month with more than 100 customers. It has drawn $25 million in venture capital funding.
“For businesses, a dollar saved is 100x better than a reward point earned. So Ramp focuses on reducing burn instead of rewarding wasteful spend,†said Glyman, the firm’s chief executiveOpens a new window .
Analyzing wastefulness
It also has built-in expense software and offers free credits for third-party services. A key feature is its credit card analytics. It seeks out wastefulness at a client company, like multiple subscriptions or duplicative software offerings. It also finds market rates for services.
Ramp’s clients include Eight Sleep, a New York tech company which specializes in manufacturing of smart mattresses, and the healthcare tech firms Candid. “Ramp did an audit for us at no cost and found over $250,000 in savings right out of the gate,†says Nick Greenfield, Candid’s chief executive.
One of its main competitors is Brex, which also touts easier access to corporate cards with higher credit limits, no personal liability to founders and instant approval.
The San Francisco company, affiliated with MasterCard, has grown in popularity by offering credit to start-upsOpens a new window turned down by traditional card companies. It also entices customers with redeemable points.
Brex founder Henrique DubugrasOpens a new window said the firm uses bank account data to assess creditworthiness, therefore mitigating risk. “We monitor the financial health of our customers to ensure they can pay back any spending made on our card,†he said.
Automates auditing process
Brex automates the expense and auditing process. Card users can send a text message with a receipt to Brex, which after a review replies with a log. Each expense is noted with a vendor, and executives can view the transaction and an employee’s total spending with the vendor.
Brex says it has attracted more than 1,000 customersOpens a new window , is opening up globally and picking up larger clients. It was founded in 2017 and was valued at more than $1 billionOpens a new window after its first 18 months of operation. It has raised more than $350 million in venture capital funding.
Another competitor is American Express. Its Corporate Program for StartupsOpens a new window , aimed at young businesses as they grow, offers full corporate liability with no personal credit score impact, and no personal guarantee or security deposit required. Expense reportingOpens a new window capabilities include categorizing transactions, attaching receipt images to reports and exporting reports into PDF form.
Yet another competitor is the payments platform Stripe, which rolled out a credit card in 2019. Stripe, affiliated with Visa, sets spending limits per person, per month and per category and offers a 2% cash refund on certain purchasesOpens a new window .