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We first wrote about key US-based Small Business Lenders in November 2017. In case you missed it, here it is: Overview of US SMB Lenders (Alternative Lenders). This new article is a great addition and update! Please enjoy!

Small Business Lending has dramatically evolved since the market crash of 2008. With the advent of fintech marketplace lending, the almost $700 Billion small business lending market has grown aggressively. These alternative lenders have helped small businesses flourish by smoothening the loan approval process and giving them greater access to cash. Nearly $663,000 was loaned to small businesses on average with maximum loans ranging from $13,000 to $1.2 Million. The rise in small business lenders has created more than 358,911 jobs and $12.6 Billion in wages.[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner][vc_column_inner][vc_single_image image=”7423″ img_size=”large” add_caption=”yes” alignment=”center”][/vc_column_inner][/vc_row_inner][vc_column_text]

Small Business Lending Trends to Follow

Percentage of Banks That Consider This Institution a Competitor for Small Business Lending[/vc_column_text][vc_row_inner][vc_column_inner][vc_single_image image=”7424″ img_size=”large” add_caption=”yes” alignment=”center”][/vc_column_inner][/vc_row_inner][vc_column_text]This illustrates that big banks understand the threat posed by the fintech lenders to their small business lending portfolio.

Fintech and alt-lenders are characterized by their tech prowess, agility and cost effectiveness. These qualities allow them to underwrite even the smallest of loans. Their weakness is the high cost of customer acquisition, asset-liability mismatch and expensive financing. Banks and Credit Unions with their long-term low-cost deposit base and with deep community roots are a powerhouse in the same exact areas where alt-lenders lack. Combining the strengths of both fintechs and traditional lenders is a no brainer. The industry is witnessing collaboration in three ways:

  1. Banks invest in SMB alt-lenders: Goldman’s investment in NAV and Citigroup’s investment in BlueVine are the prime examples of big banks backing SMB lenders with hard cash.
  2. Banks partner with SMB lenders: OnDeck’s partnership with JP Morgan is the most famous and the earliest example of such an association. OnDeck basically provided the tech platform and JP Morgan had the captive small business audience.
  3. Banks partner with fintech vendors: Instead of passive investment and/or allowing access to third party lenders, many banks have moved towards partnering fintech partners like MonJa. There is no major upfront investment; no sharing of data with a competitor and the lender gets to monetize its small business relationships. 

Alt-lending is hyper-focused on transparency. So not only do you see a greater emphasis on transparent lending procedures but also the removal of complex fee add-ons and convoluted interest rate structures. The new alt-lenders are obsessed about Net Promoter Scores and transparency is the key for better rankings. Especially in a crowded alt-lending industry, transparency will be vital for building long term loyalty.

Online marketplaces are speeding up the funding process by simplifying the loan application and approval process. The increased use of AI and ML has automated the credit decisioning to a large extent. The reduction in waiting time (which can be weeks currently) is a key differentiator between lending platforms. Speed will act as a strong moat for lenders in the future.

Players in Small Business Lending


The small business alt-lending universe is set to expand multifold in the years ahead. Fintech lenders are dominating growing niches like e-commerce sellers and many payment fintech companies (like Paypal and Square) are tapping in-built audiences for their lending products. But traditional banks have woken up to this seismic shift in a trillion dollar industry. They are aggressively partnering up and investing in tech to keep abreast of fintech innovation. The biggest beneficiaries of this growth are the small business sellers. Left without funding during the 2008-09 financial crisis, the backbone of American economy are finally getting their day in the sun.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/2″][vc_custom_heading text=”Request MonJa’s Loan Underwriting Demo” font_container=”tag:h4|font_size:25|text_align:left” google_fonts=”font_family:Raleway%3A100%2C200%2C300%2Cregular%2C500%2C600%2C700%2C800%2C900|font_style:700%20bold%20regular%3A700%3Anormal”][vc_custom_heading text=”Our platform supports consumer term, C&I, CRE, auto and other small business loans.” font_container=”tag:p|font_size:20|text_align:left|color:%23000000″ google_fonts=”font_family:Raleway%3A100%2C200%2C300%2Cregular%2C500%2C600%2C700%2C800%2C900|font_style:700%20bold%20regular%3A700%3Anormal” css_animation=”bounceInUp”][/vc_column][vc_column width=”1/2″][vc_column_text][yikes-mailchimp form=”10″ submit=”Request Demo”][/vc_column_text][/vc_column][/vc_row]

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