As Square and PayPal push business financing, American Express is adding extra funding options to give businesses a lifeline when spending needs a spike.
American Express OPEN has upgraded its SimplyCash benefit business credit card to SimplyCash Plus, offering spending beyond the card's credit limit and increasing cash-back rewards for supplies and expenses.
The upgraded card will help small business owners make inventory and equipment purchasing decisions when extra money is needed during various billing cycles, said Audrey Hendley, general manager of American Express OPEN products.
"We're really bringing charge and lending capabilities together to revise the product and give flexibility to access funds when it is most needed," Hendley said.
Even though American Express OPEN targets a "larger" small business in the $10 million to $20 million annual income range, the industry has seen players like Square, with Square Capital, and PayPal, with PayPal Credit and PayPal Working Capital, luring interest through funding programs."OPEN brings a lot to the table and is a strong brand in the small business space," Hendley said.
In addition to the extended purchasing power, American Express provides online business management tools to help owners determine what they can afford to borrow on their cards based on their spending habit history and other factors.
American Express will issue the SimplyCash Plus card to select customers this week and prepare for a national rollout in the late first quarter or early second quarter of 2016.
Feedback from OPEN customers regarding what they consider key needs to operate their businesses resulted in the creation of SimplyCash Plus, Hendley said.
In a survey of 1,001 small business owners, 71% said a credit card was important to help fund and grow a business, while 76% said an increase in the spending limit at least once a year would be helpful.
The amount spent above the credit limit is due in full each month as part of the minimum payment due, as card members can continue to carry a balance with interest on the amount spent within their credit limit.
On the expense side, the upgraded card doubles the cap on spending that would qualify for cash rewards from $25,000 to $50,000. It gives cardholders 5% cash back on office supplies and wireless service, and 3% back on a category of choice, from gas, to air fare, restaurants or car rentals. SimplyCash Plus also pays 1% cash back on all other purchases, with no limits.
The card has no annual fee and includes purchases above the credit card limit as eligible for cash-back rewards.
Room for innovation in the small business card space exists because it remains "surprisingly small" with only about 52 different programs generally available, said Brian Riley, principal executive advisor with CEB TowerGroup.
"What American Express is doing is really putting a consumer program on the business card side," Riley said.
This is particularly true with the bump up in cash-back rewards for business supplies and expenses, Riley said. "Doing a vertical bump is not unique, as it is done pretty regularly on the consumer side where you can pick a category from which you want to benefit," he added. "But that is a piece of it that makes a lot of sense."
Businesses will have to determine whether it is more beneficial to use the Amex business card or a personal card that might save them even more money, Riley said. "Amex may not get the whole relationship each time, and some businesses may only spend about 5% on supplies annually, so getting 5% back on that 5% may not be a major incentive."
But American Express OPEN will continue to focus on the segment of business owners it serves, Hendley said.
"When you understand a segment, you get to really see how their business gets done and it provides insight from a product perspective," Hendley added.
The emphasis on cash back for supplies and expenses resonates with OPEN clients because they can "re-invest that money back into the business, or let it drop to the bottom line," Hendley said.
"It is real money that they can see and are getting for things they are doing," she added. "It becomes a business tool that goes beyond something that is not real to them. Cash is very tangible."