SMEs are the foundation of the economy. They drive growth, build competition, and create jobs, but they’re also at the back of the line when it comes to getting fast access to credit. For the most part, securing business loans from traditional financial institutions is a slow and arduous process. It’s paperwork heavy, progresses at snail speed, and often results in low approval rates. Why? Because lenders find it difficult and expensive to assess a business’ default risk without human intervention. If we were to compare SME lending to a car, it would be a stretch limo from the 80s, still chugging along and capable of hitting 60mph in just over 60 seconds… if you’re lucky. Hardly what you’d call life in the fast lane.
But it wouldn’t be fair to put the blame on lenders. It’s hard to win the speed race when you’re navigating a notoriously difficult track in a vintage ‘lending’ vehicle. Especially when that car was built to carry consumers, not businesses, corners like a bus, and still needs to follow strict (risk tolerance) rules of the road.
For many SME lenders, success in its current form looks like making it from the starting flag to the approval finish line in days, weeks, or even months. Same day funding is a distant dream. But where does that leave the small and medium-sized businesses who need funds today? Research shows that 44% of SMEs look to funding to meet operating expenses, and we can expect this number to grow considerably during emergencies and times of economic uncertainty. The same research found that 56% want funds to expand the business or pursue new opportunities. For SMEs, waiting weeks or months for approval means significant delays in exploring growth opportunities, or, worst case scenario, business closure. But SMEs are not without options when they need credit, in fact:
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