3 reasons we love SME Lenders and their tech stack.

Published on: August 25, 2023

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2 min read

Did you know that SMEs make up an impressive 99% of all businesses globally, and a staggering 23.1 million within the EU?

These dynamic small and medium-sized enterprises are the driving force behind innovation and job creation. However, securing the necessary funding to start, grow, or sustain these businesses has often been a challenge. This is where SME lenders step in with tailor-made financial solutions designed precisely for SMEs. In fact, the global funding gap for SMEs is estimated to be around $1 trillion annually, according to World Bank data. In this article, we'll explore three compelling reasons why we have a deep appreciation for SME lenders and the impactful technology that sets them apart. 

#1 Flexibility in Loan Criteria. 

Traditional banks have long held a reputation for their inflexible lending criteria. They often set high standards and ask for a lot of paperwork, making it challenging for SMEs to secure loans. For example, the restriction of using collateral as a basis for lending could make it harder to get loans. instance, the limitation of collateral-based lending could impede the acquisition of loans. Collateral-based lending involves borrowers offering assets as security for a loan, giving reassurance to the lender that they possess an asset that could be claimed in the event of loan default, potentially recuperating their funds. 

In contrast, SME lenders stand out with their flexibility in loan criteria. They have harnessed the power of APIs by partnering with fintech platforms to incorporate alternative data sources. This innovative approach allows them to employ innovative underwriting models and assess creditworthiness more accurately. These collaborations enable them to provide loans to businesses with minimal credit history or reliance on collateral-based lending, promoting inclusivity and unlocking fresh opportunities for SMEs. Read more about the potential of partner ecosystems in SME lending here. 

 #2 Enhanced Customer Experience. 

While digitalization has transformed the landscape of retail banking, SME lenders have taken the lead in comprehending the precise needs of their customers.  According to a comprehensive EY report, the time has come for traditional banks to catch up by embracing a dynamic digital credit system. 

SME lenders leverage technology to create a seamless and enriched customer experience. Their data-driven expertise enables them to analyze information comprehensively, anticipate funding requirements accurately, and stand by businesses throughout their loan journey. This data-centric approach considers variables such as cash flow, transaction history, and online presence, enhancing risk assessment precision and tailoring loan conditions to suit each SME. The outcome is a swifter approval process for borrowers, greater assurance of fund availability, and more favorable loan terms. 

#3 Outstanding User Experience (UX). 

SME lenders have strategically elevated the user experience (UX) for their valued customers, setting them apart in the financial landscape. These players have pioneered the development of intuitive and user-centric online platforms and mobile applications, revolutionizing how small and medium-sized enterprises interact with financial services. These digital platforms offer SMEs an accessible and convenient interface to navigate loan applications, submit essential documents, and manage their accounts effortlessly.  

One remarkable advantage lies in eliminating the traditional need for physical visits to physical bank branches. This modern approach liberates SMEs from time-consuming processes, allowing them to allocate their precious resources towards enhancing their core business operations.  

In contrast, traditional banks, while essential pillars of the financial system, can sometimes be burdened by legacy systems and bureaucratic procedures. This can result in a less streamlined and user-friendly experience for SMEs seeking financial assistance. The cumbersome nature of traditional banking interactions, involving extensive paperwork and lengthy waiting periods, can hinder the agility and convenience that SMEs require to stay competitive in today's fast-paced business landscape. Read more about how next-gen core banking is transforming the UX within the SME lending landscape here. 

The Future of the SME Lending Market  

SME lenders have revolutionized the business financing landscape forever - by embracing fintech and leveraging it to meet the demands of SMEs. Their focus on flexibility, data-driven decision-making, personalized customer experiences, and seamless user interfaces make them invaluable to small businesses. In an era of constant technological advancements, SME lenders have demonstrated how modern technology and core banking platforms can lead to competitive differentiation and better serve the financial needs of SMEs. As the market evolves, incumbents must adapt and innovate to stay relevant and provide meaningful value to their customers. 


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