Global Roundup: Innovative SME Lenders

Following up from our previous Global Roundup covering the challenges faced by SME lenders across the globe, we asked our sales executives to highlight some of the most innovative SME lenders in their region. Read on for insights into innovative lenders based in Canada, the US, Latin America, Europe, and the Asia-Pacific regions!

Asia-Pacific

Patrick Tan, Regional Sales Director – Singapore

Fintech lenders are able to be more agile and those that are backed by large investors are able to leverage the financial backing to support the SMEs that are rejected by banks. The traditional banks are also partnering with these fintech lenders to refer SME accounts that were rejected by their internal credit policies. They typically use the digital platform to cater to these SMEs so that time and effort are saved in the onboarding and credit process. In turn, SMEs are also now able to use these Fintech lenders to quickly assess how much loan they can obtain without wasting too much time and effort submitting documents.

In recent years, the market has seen the launch of many new online lenders, focused on deploying innovative technology to speed up the application and decision process. These include Validus, Funding Societies, Minterest, and Multiply.

Tim Kerslake, Account Director – Australia and New Zealand

In a market where the Big 4 banks have an 85% market share but have stringent lending criteria access to finance has been identified as the biggest barrier to small business growth. Several alternative online lenders have launched in Australia to offer small businesses quick and flexible loans, with new technology stacks that remove the obstacles (time to approval) that SMEs have traditionally faced.

Judo Bank is a fully licensed challenger bank focused only on SME lending. With wholly cloud-based technology it is rapidly scaling its operations within Australia through significant investment ($40m in 1019). 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.

Americas

Gaston Peralta, Director of Business Development – Latin America

Creci is a social impact lending platform for SMEs. It currently operates in Colombia and has plans to expand throughout the Americas, including the United States. In addition to serving the credit needs of small and medium businesses, Creci assesses how companies’ operations and products align with the United Nations Sustainable Development goals, assigning companies a social impact score.

Creci provides credit facilities and social impact measurement and reporting tools to entrepreneurs pursuing at least one of the United Nations Sustainable Development Goals.

As a social impact lending platform delivering job and income growth in markets, Creci lends to SMEs supporting local micro-environments which include, among other things, a platform that fosters growth in three major areas:

  • Empowering Individuals – Reducing poverty and hunger, powering equality, and providing better living conditions and health care
  • Empowering Communities – Job creation, building the economy and infrastructure, providing strong institutions, and producing and consuming responsibly.
  • Protecting the Environment – Climate/Energy and Clean Water

Julie Mannella, Director of Sales – Canada

While there are many SME lenders in Canada who are leading the charge in innovation, from Thinking Capital who are leveraging partnerships to help their clients expand their access to much needed products and services, to equity crowdfunding organizations such as frontfundr or vested.ca who are raising capital by diluting their ownership and accepting equity partners. One organization that is truly revolutionizing the small business lending space is a company called Clearbanc.

Their approach to assessing risk is to ask the SME to connect the accounts they use to run their business so that Clearbanc analyze their revenue data and evaluate the health of the business directly from the source. By assessing an SME’s future business performance, they’re able to discern potential cash flow, whereas most lenders focus exclusively on past performance, this is an example of innovation at its best. The organization was founded by Andrew D’Souza and Michele Romanow, a judge on Canada’s version of Shark Tank called Dragon’s Den. If anyone has the acumen to evaluate business risk, it is Michele… and she does it in style!

Brendan Deakin, Sales Executive – Northeast US Region

Over the past 5+ years, advancements have been made in small business lending, including the development of FinTech stars like OnDeck, Fundation and others. These companies found unique ways to use data/analytics to automate SME underwriting, have dramatically expanded access to credit/banking for SMEs.

These fintechs are now partnering with big banks to offer/white-label their technology/underwriting expertise so that SME lending can be a profitable sector for top tier/regional banks. The best examples of this are both OnDeck and Fundation. OnDeck partnered with JPMC, Fundation with Citizens Bank and Fifth Third Bank.

Europe

Chris Kneen, Regional Sales Manager – United Kingdom

The UK has seen an exponential growth of SME lenders entering the market in recent years and there has been a central focus on disruption and innovation. The BCR Capability and Innovation fund was set up to specifically improve the market choice, ignite competition and advance innovation in SME lending. £450m has been distributed amongst 15 lenders to do just that and time will tell if the funding will achieve this.

There are stand-out lenders in the market that have capitalized on deploying new technology, risk decisioning tools and raising their market profile. Funding Circle, for example, has now originated over £5billion of loans through their P2P platform and is able to provide a decision on an application in only a few seconds. Spotcap, OakNorth, Revolut for Business, Iwoca and Capital On Tap are all offering same day decisions on applications through their online platforms. Starling Bank has announced their commitment to make almost £1billion of balance sheet lending available to SMEs by 2023. One of our clients, Hitachi Invoice Finance, have also broken the mold in this notoriously manual-process driven market, by reducing their decisioning time from 60+ days to 30 mins, aided by the latest risk decisioning technology.

An SME now has lots more choices in the market and therefore there has been an increase in the number of market-place platforms and aggregators. Funding Options and Funding Xchange are leading the way in this space with wide access to products through fast, online application tools. The more players enter the SME lending market, the more competitive it gets with rates, processes, and speed of funding. Choosing the right technology and decisioning software is key.

Patrick Radise, Senior Sales Executive – Nordics and Baltics

As with other European regions, new online lenders are being launched to provide a fast, competitive alternative to mainstream banks. And they are being creative. iZettle for example, are now offering their POS customers short-term business loans – they have accurate and real-time transaction data on that business and can predict its performance. This insight usually takes days to piece together but they have this available instantly via their platform.

Other online lenders that are offering fast decisioning and funding to SMEs across the region include Aprila, Holvi, Trine, Toborrow and Collector Bank. They have focused on improved user experience and making the application process as frictionless as possible.

Marcus von Rahden, Regional Manager – Central and Eastern Europe

Open banking is still an area that banks are struggling to standardise yet once adoption has improved, the possibilities look positive for lenders who can access and use applicant and SME data effectively within their technology stack.

There has been a steady rise in online lenders entering the market to offer alternative sources of funding for SMEs across Central Europe. 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 48hrs. New players from the consumer space are exploring SME lending, specifically to start-ups, including Auxmoney and Klarna, whilst P2P lender Funding Circle continues to grow its portfolio across Germany through its near-to-instant decisioning model. Invoice factoring is also growing in popularity as an SME lending product across the region, and many players are looking at further streamlining and automating their application, decisioning and underwriting processes to offer serious competition to the mainstream banks and meet the demands of the SME market.

Inigo Rodriguez Navarro, Regional Sales Manager – Iberia

New online alternative lenders have launched in Iberia in recent years, increasing competition and offering SMEs faster alternatives to the banks. These include Enisa, October, MyTripleA, Arboribus, and Raize. Novicap provides invoice financing to SMEs in Spain and recently expanded into the UK and the Netherlands. Invoice factoring is traditionally a lengthy and manual process but Novicap has developed an application and funding platform that is 100% online application process and can deliver finance within 48hrs.

Although the market is seeing an increase in innovative, digital-first lenders, Tier 1 banks are committed to improving their processes and technology to remain a competitive choice. For example, BBVA Spain recently launched Click&Pay, a tool that offers working capital loans, a short-term line of credit for paying payrolls, suppliers, taxes or imports that can be accessed online with one click. Once the line of credit is authorised, the client can use that line anytime, anywhere, from the website or the app.


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