Is Pipe a loan?

When it comes to funding growth for small businesses, there are a few different options. Let’s take a look at two popular alternatives, Pipe Capital and traditional loans (also known as term loans), to see how they compare for small businesses.

Traditional Loans

• Fixed monthly payments can strain cash flow, especially in slower periods.

• Typically require collateral, putting personal or business assets at risk.

• Lengthy application and approval process, often based on credit scores.

• Interest accrues over time, with additional fees like origination charges.

• Often harder to secure for small or underserved businesses due to traditional underwriting models.

Pipe Capital

• Payments flex to match your revenue, reducing cash flow strain during slow months.

• No collateral or personal guarantees required, minimizing risk to personal and business assets.

• Underwriting is fast and based solely on the business’s performance and revenue, with funds available in as little as 1-2 business days.

• Transparent, one-time, flat fee—no interest or escalating costs over time.

• Designed for small businesses and underserved industries, making capital more accessible.

Is Pipe a loan?

No. Pipe isn’t a lender and Pipe Capital is not a loan.

Pipe Capital offers a fast, frictionless alternative to loans with a cash advance built into the software tools SMBs use every day. By leveraging anonymized transaction data, Pipe makes working capital available to a wide range of small businesses, including many that aren’t able to access traditional lending. 

Now we’ll take a closer look at both options and see how they compare.

Traditional loans for SMBs

Lending was the primary financing model for thousands of years, which is why the term “loan” is often a catch-all used for getting outside funds.

In the simplest terms, small business loans involve borrowing money (the principal) with an obligation to repay the loan along with interest, typically in fixed monthly payments. While these payments are very predictable, small business revenue, unfortunately, often isn’t. 

There are several potential downsides to loans for SMBs. First, as mentioned above, the fixed payment schedule can lead to problems if your revenue has seasonality or other fluctuations. For smaller businesses, loans can also be very difficult to secure, as underwriting models aren’t always designed to fit how those businesses operate. And speaking of secure, traditional loans are typically secured loans, which means the loan is tied to collateral, like equipment or real estate, which can be put at risk if you’re unable to repay the loan. 

Traditional lending is also based heavily on credit scores, which have been shown to carry inherent bias, often making it much harder for women- and minority-owned businesses to access the capital they deserve. Unfortunately, while the term “loan” has become ubiquitous, a recent PYMNTS Intelligence report showed that only ~14% of small businesses had access to working capital through their bank. 

Now let’s look at Pipe’s solution to the challenges of traditional loans.

How does Pipe Capital compare to loans, in terms of interest?

When you take out a loan, you repay the principal amount you borrowed, possibly an origination fee (2-5% of the loan amount is common), and interest which accumulates until the loan is paid off. The longer it takes to repay, the more interest you accrue, whether that’s a function of a longer repayment term or some option from the lender to pay more slowly due to hardship.

Since Pipe Capital isn’t a loan, there’s no interest and no origination fee. When a business requests an advance from Pipe, they get a transparent view of exactly how much they’ll pay — the amount advanced, plus a one-time, flat fee. Unlike an origination fee, the one-time capital fee is added to the total and paid over time, representing the total cost of capital. And, unlike interest, this fee never increases, even if it takes longer than expected to pay your advance amount.

How Pipe Capital works for SMBs

Pipe Capital was designed for business builders, as a way to deliver fast, flexible capital access embedded in the software they use every day. Unlike loans, it’s a cash advance, meaning small businesses can advance a portion of their future revenue for up-front capital when they need it.

Because Pipe Capital powers capital solutions through software partners, businesses can be pre-qualified or pre-approved before they even seek financing. Rather than depending on credit scores and lengthy applications, our underwriting is based on live anonymized transactions, which allows us to assess the health of a small business from just a few months of history. A few simple compliance checks are typically all that’s needed, and once approved business owners can have funds in their bank account in 1-2 business days, depending on their bank’s policies. 

Our underwriting models can also be tailored to a specific industry to reflect a better understanding of how those businesses operate. All this enables Pipe to provide capital access to many businesses underserved by traditional lending. 

As an advance, our payments automatically flex with the revenue of the business, preventing them from being caught with a large, fixed payment during a month with lower revenue. 

Who is Pipe Capital built for?

Pipe Capital was designed for small and mid-sized businesses, all the way down to microbusinesses and even sole props. While many of these smaller businesses struggle to obtain loans, our data-driven underwriting approach makes it possible to advance their revenue with Pipe Capital.  

Pipe Capital was also built with our software partners in mind. By partnering with Pipe, you can seamlessly embed Pipe Capital into vertical SaaS, payfacs, and other software platforms that processes card payments for B2B customers. Our capital offering is fully themeable to feel native to your platform, and we have three integration options to choose from, so you can launch in as little as a few weeks or build a deeper custom integration.

The bottom line

When it comes to accessing capital, small businesses face a range of challenges, especially with traditional loans that can be rigid, slow, and inaccessible to many. Pipe Capital offers a modern alternative, designed specifically to meet the needs of today’s SMBs. By advancing future revenue without requiring collateral, personal guarantees, Pipe delivers a flexible and frictionless financing solution that adapts to your business’s cash flow.

Whether you’re an SMB looking for fast, reliable access to working capital or a software company aiming to provide embedded financial services to your customers, Pipe Capital is a game-changer. It’s not a loan—it’s a smarter, simpler way to fund growth without the constraints of traditional lending. With Pipe, you can focus on what matters most: running and growing your business.

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This post was originally published in November 2021 and updated in February 2025.