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Competing in Small Business Lending

How do banks start serving small and medium-sized enterprises again?

There are almost 30 million small businesses in the US, which make up over 99% of all firms in the country. As the primary source of job creation, these businesses play a pivotal role in the economy. Still, post-2008, capital access available to these small businesses has diminished for a number of reasons and they are still reporting today that they don't have adequate credit to expand at their desired pace. The biggest underlying problem is that traditional banks employ the same workflow processes and staffing resources toward analyzing applications regardless of loan size, making the pursuit of small business lending a high-maintenance and less profitable endeavor. This gap has given way to the rise of alternative, online lenders who can offer sleek experiences and quick services to these SME clients. Read Moody's Analytics article "BATTLE FOR SMALL BUSINESS CAPITAL ACCESS: TRADITIONAL VS. ALTERNATIVE" to see what banks can learn from their innovative alternative lending counterparts and stay competitive in the small business marketplace.

First published on 11/12/2017

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