The SMB lending landscape is growing increasingly crowded. For community banks, the competition is no longer limited to other banks—and for alternative lenders, it’s not just other alternative lenders.
At institutions with global presences and deep pockets, SMB lending is an appealing low-barrier, low-risk market to enter—and a range of industry-leading companies are capitalizing on the opportunity.
Digital giants like PayPal, Amazon, and Stripe. Alternative lenders like Biz2Credit and Kabbage.
Another entrant? QuickBooks Capital. The market isn’t only expanding, it’s multiplying—and any company with a strong balance and a desire to growth can enter as they please.
Let’s take a closer look at how.
For many companies jumping into the SMB lending game, lending functions as a near-inconsequential part of their overall operations, and it’s one they can pursue without putting profits at risk.
What’s more, these giants have digital platforms that are already deeply embedded in small business accounting systems. It’s simple: For industry leaders like QuickBooks, PayPal, and Amazon, lending is an asset builder—a strategy for deepening relationships and generating revenue. They do so by leveraging these strengths:
- Extra cash. Companies like Amazon have billions of dollars in cash they can channel towards additional revenue streams. It’s an edge that can’t be overstated—and if leveraged correctly, only breeds more capital.
- Existing relationships. Established market leaders, from Stripe to QuickBooks, have brand trust and loyalty on their side. Proven successes and sweeping global customer bases make acquiring new business easy—and the same goes for increasing sign-ups for a new service or offering.
- Expansive datastores. For brands like these, data is currency—and they’ve been collecting at scale for years. Insights from past, present, and prospective users set them lightyears ahead, making it easier to identify and target potential lending customers. This is a particularly appealing perk for SMB customers who can simply repurpose their existing account data, history, and credentials to get a loan.
- Easy pre-approvals. With extensive customer data already accounted for, creating pre-approvals takes these companies a fraction of the time. Saving overhead and yielding higher success rates, this advantage lets players seamlessly demonstrate the two things small business customers care about most: speed and convenience.
You may not have billions in idle cash, but you probably don’t need it. If you’re a community ban or credit union, small business lending is a part of your core business function (and if it’s not, it should be). This all starts with adopting the right digital solution. Technology can help you level the playing field in the face of competition—powerfully securing customers and profits before your business customers leave you for somebody else.
Here’s how you can capitalize.
Whether you’re a community bank or an alternative lender, here are four of your biggest competitive advantages:
- Competitive rates (with room to increase them). While large players generate cash flow through their core operations, you generate cash flow through your depository relationships. This means you can make loans at highly competitive rates—something very appealing to small business owners short on funds. In fact, you have the flexibility to increase your interest rates, knowing that the market can bear it.
- Existing customers. While big banks and digital giants have large existing customer bases, traditional alternative lenders don’t. If you’re a community bank in this equation, you have an edge. The rapport you’ve built through depository operations positions you to better serve small business customers than a brand new lender—and robust small business lending technology can help you monetize existing relationships.
- Automatable workflows. With advanced and customizable automation capabilities, your institution can lower the overhead costs of small business lending, minimize operational spend, and ramp up revenue. This means more loans in less time, with greater ROI—a win-win-win.
- Increased scalability. Beyond cutting out tedious tasks and costly manual processes, automation and digitized workflows allow you to do something you’ve likely never been able to do before: scale. Gaining the ability to multiply your loan capacity without needing to hire (or fire) any additional heads is the precise definition of scale. It’s how you can catch up to the competition without putting your profits under pressure—and compete with the big guys without needing to become one.
An end-to-end digital solution can be the key to success in an overcrowded landscape. And believe or not, your institution does have some advantages—it’s just a question of knowing how to use them.