Fintech Firm Bizzy Reveals Alarming Trends in Small Business Credit Usage and Costs

In a recent inspection conducted by the fintech company Bizzy during the first quarter of 2023, concerning the financial health of small businesses in Israel, startling revelations have emerged. The inspection, which encompassed nearly 1,000 bank accounts representing approximately 800 small businesses, has shed light on the critical role of credit lines, their utilization, and the associated costs.

The inspection revealed that a staggering 97% of the small businesses under review took full advantage of the credit lines provided to them by banks. Only a mere 3% chose not to utilize this financial lifeline. This data underscores the indispensable role credit lines play in the survival and operation of small businesses, particularly given the payment conditions in Israel.

One of the most concerning findings of the inspection was the significant increase in effective credit costs during the first quarter of 2023. While small businesses paid an average of 15.3% for their credit lines in the last quarter of 2022, this cost soared to 17.5% in the first quarter of 2023. This cost encompasses not only the interest businesses pay on the utilized credit but also the credit allocation fee levied by banks. Notably, this allocation fee is applied to the full credit limit, even if a business only uses a portion of it.

Distribution of Credit Frameworks

Approximately 68% of the small businesses examined had access to a credit line from a bank. The distribution of credit limits was as follows:

• 22% of businesses had a credit framework of up to NIS 50,000.
• 15% held credit limits ranging between NIS 50,000 and NIS 100,000.
• 12% possessed credit limits between NIS 100,000 and NIS 200,000.
• Another 12% had credit limits ranging from NIS 200,000 to NIS 500,000.
• Only about 7% of businesses boasted credit frameworks exceeding NIS 500,000.

Bizzy highlighted the critical nature of credit lines for small businesses, often acquired or expanded when clients face cash flow difficulties and limited bargaining power with banks. Deviating from these credit limits can expose businesses to refunding charges and harm their credit ratings. Despite the importance of this issue, Bizzy noted the absence of official figures regarding the actual cost incurred by small businesses in their interactions with banks.

Bizzy is a fintech company operating under the authority of the Capital Market Authority, providing extended credit solutions to small and medium-sized businesses. The company, which commenced operations in January 2022, is led by CEO Sa'ar Zakharish, formerly the head of the digital department at Bank Hapoalim.

Bizzy's platform is built on technology from the American fintech company Bluevine, co-founded by Israelis Eyal Lipshitz, Nir Keller, and Moti Shatner. In its journey, Bizzy has successfully raised $7.5 million in funding from prominent entities, including Blue Wine, the Phoenix Group, and the foreign financing company Bankai Orshi.

The findings of this inspection underscore the critical role of credit lines for small businesses in Israel, while also raising concerns about the associated costs and potential risks. As small businesses navigate these financial challenges, organizations like Bizzy are working to provide solutions and transparency in this vital sector of the economy.