SME Lending: The Road to Real-Time Approvals SMEs are known as 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 60 mph 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 city bus, and still needs to follow strict rules (i.e. risk tolerances) of the road. For many SME lenders, success in its current form looks like making it from the starting flag (filling out a loan application) to the finish line (approval of said loan – and then of course, there’s actually getting funds) in days, weeks, or even months. Same day funding for SMEs 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% of SMEs need 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, can result in business closure. SMEs are not without options when they need credit, in fact:
Global Snapshot: SME Lenders Driving Innovation Around the World
Fundbox (US): Fundbox can make lending decisions in under three minutes without requiring paperwork or a credit check. If approved, businesses typically get the funds within 24 hours. OnDeck (US): OnDeck has lent $10 billion to businesses across the world. It only takes 7.2 minutes on average to complete a loan application and the lending decision is based on the business’s overall health.
Clearbanc (Canada): Clearbanc analyzes revenue data and evaluates the health of the business directly from an SME’s bank performance, like many other lenders, Clearbanc uses banking data to predict future business success. account. Instead of looking at past
Funding Circle (UK): Funding Circle has originated over £5 billion of loans through their P2P platform and is able to provide a decision on an application in only a few seconds.
Novicap (Spain): Invoice factoring is traditionally a lengthy and manual process but Novicap has developed an application and funding platform with a 100% online application process, and can deliver financing within 48 hours.
iZettle (Germany): iZettle offers their POS customers short-term business loans. They use the real-time transaction data captured on their platform to predict business performance and credit risk. Penta (Germany) Online business account platforms like Penta are now expanding their services to include short-term business loans, through a fully digital application journey, with pay-outs available within 48 hours. Validus (Singapore): Validus Is a P2P lending platform that typically funds loans within four days. Its credit risk model analyzes information from invoices, contracts and cash flow. They use many data points and machine learning to identify high potential SMEs. Multiply (Singapore): Multiply is an online provider of invoice factoring and unsecured business loans. With a fully online application process and digital documentation facility, business loans can be funded within 24 hours.
Konfio (Mexico): Konfio provides a fast alternative loan option for SMEs. Decisioning is based on electronic invoice data and they can typically fund loans within a one-day turnaround period.
Omni Latam (Chile & Colombia) Omni Latam is Latin
Prospa (Australia): Applications with Prospa, can take as little as ten minutes and funds can be drawn in less than 24 hours. A key innovation they have adopted is linking applicants’ bank accounts to their platform, speeding up the verification process and attaining business MI in real-time.
Capital Float (India): Alongside credit scoring, Capital Float’s decisioning process also includes a psychometric assessment. Businesses can apply online in 10 minutes and get a decision instantly, and they’ll typically have the funds in hand within 72 hours.
SMEs contact 2.7 institutions and submit three applications on average during their hunt for funding.
America’s first neobank for SMEs. Omni uses big data, machine learning, and automated invoice analysis to provide SMEs with accurate factoring services and funding in 24 hours.
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