How to wow SMEs with tailored short-term finance

One of the major challenges facing both commercial banks and their SME customers is working capital: SMEs need flexibility to manage capital effectively, while commercial banks face hurdles to provide effective access to it.  

Traditional asset-based revolving loans are the conventional way of providing finance to small businesses, but can introduce cashflow issues, particularly for fast-growing or early-stage businesses and those with limited credit history. And structured term loans can unnecessarily increase the cost of borrowing for SMEs, with rigid repayment schedules that are often not viable.    

Given these issues, 75% of SMEs are turning to fintechs and digital-first financial offerings to solve their cash flow issues, according to a report by PYMNTS. 

Yet it would be a mistake to let upstart fintechs woo your hard-won SME customers, when banks are well-positioned to meet client needs. The SME sector is worth pursuing and is only expected to expand, growing by as much as 10% annually.  

But what if you could create a new solution that provides tailored, short-term finance to businesses enabled by a modern platform that allows unlimited customization for variables such as industry sector, and risk profile?   

Introducing Business Now, Pay Later™

Inspired by consumer BNPL solutions, Business Now Pay Later allows a business to pay off the cost of a purchase over time with installment payments, rather than paying the full sum at once. The customizability of these installment loans allows commercial banks to easily tailor their offering for each business’s need. For example, longer repayment periods could be offered for a car parts shop than for a restaurant. Compared to traditional loans, this solution offers a way for commercial banks to offer a truly innovative, market leading proposition, and set themselves apart from the competition. 

Banks can win—not just compete 

Consumers are accustomed to seamless, user-friendly services like BNPL. Why not make the same convenience available to SMEs? Banks can provide short-term tailored financing options to cover SME expenses such as bulk purchases of inventory, equipment, or services.  

Why banks?  

Your commercial bank boasts built-in advantages that no fintech can match, making banks uniquely positioned to serve the needs of SMEs. To establish a competitive edge and win in the small business lending market, you can leverage your inherent strengths and capabilities as an established financial institution, including: 

Trust and reputation 

No organization can match the credibility you bring as a bank. After all, banks like yours have a long history and established reputations as trusted financial institutions. No matter the market conditions, your longstanding relationship with existing SME customers is a powerful tool to attract customers to your business installments offering. In the process, providing these loans can also be an opportunity to deepen and strengthen ongoing customer relationships by offering new services that directly address their pain points.  

Integrated customer experience across products 

The last thing your SME customers want is to jump through hoops just to complete a business transaction. By offering installments loans right alongside your existing products in your customer banking portal, you can ensure a painless customer experience. At the same time, you’ll position your banking digital experience as the one-stop-shop for SMEs to manage their financial needs. 

Risk management expertise 

Loans are inherently risky, but no organization has a better understanding of a business’s creditworthiness than their bank. By design, your bank has extensive access to the data needed for effective risk management and credit underwriting for each customer. This expertise allows your bank to instantly check each customer’s creditworthiness and offer loans from a well-informed position. 

Fintechs may offer an appealing proposition for SMEs looking for modern solutions to their cash flow needs, but your unique strengths as a bank can position you to stand out in the market. By leveraging these strengths, your institution will be poised to turn a turbulent market for SME financing into an opportunity for growth. 

Ready to experience these benefits for yourself? Learn more about how Business Now, Pay Later™ makes it possible.

Contact E6 today