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10 Fintechs That Are Transforming SME Lending

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September 9, 2022 | Jonathan Pryer

Embracing the Challenge and Accelerating the SME Lending Process

Micro, small and medium enterprises (MSMEs) are the economic darlings of the economy. They’re innovative, agile and drive competition – not to mention create most of the jobs. However, they’re often shuffled to the back of the line when it comes to accessing credit. Why? Lending to SMEs can be inherently risky and incredibly time-consuming. Traditional financial institutions often require a paperwork-heavy application process and may find it difficult to execute credit risk decisioning without human intervention.

Forty-four percent of SMEs need funding immediately to meet operating expenses, and 56% of SMEs look to credit to innovate and grow their business. But when accessing credit quickly can mean the difference between a business flourishing or floundering, what are the options?

Thankfully, these days there are more options. Increasingly, innovative lenders, including fintechs and neobanks, are popping up all over the globe to help ensure that SMEs get access to credit when they need it. We’ve chosen a handful of these innovators who are up for the challenge of credit risk decisioning for SMEs.

  1. OakNorth – UK-based fintech OakNorth delivers instant credit analysis and real-time portfolio insights focused on transforming commercial lending. The co-founders of OakNorth were rejected for the credit needed to grow their business numerous times, prompting them to create their Credit Intelligence platform. Their goal was to build a robust, sustainable bank but also to create software that would enable other banks to lend to SMEs that were previously underserved.
  2. NeoGrowth – Founded in 2011, India-based NeoGrowth Credit is a tech-enabled business that offers unsecured loans to small retailers in India. Combining traditional and alternate data for more accurate credit scoring, NeoGrowth also offers dynamic repayment terms and automated collections processes to help identify the most creditworthy customers. Calling themselves pioneers in SME lending based on the underwriting of digital payments data, their mission is to help small business owners drive growth that matches their ambitions.
  3. Kabbage – Selected for the 2019 Forbes FinTech 50 startups list, Kabbage (now owned by American Express) provides SMBs with credit by evaluating business-focused alternative data like accounting info, online sales and shipping. With this more nuanced view of data to better understand performance, Kabbage is able to offer flexible credit options in real time.
  4. Banco Pichincha – In 2016, Banco Pichincha received a credit line of $55 million from the International Finance Corporation (IFC) to finance loans to women-owned SMEs in an effort to fuel the growth of female Ecuadorian entrepreneurs. Ecuador’s largest bank, they doubled down on their mission in 2019 when they signed an alliance with the Overseas Private Investment Corporation (OPIC) and Wells Fargo for a combined loan of $108 million to support loans to MSMEs in the region that are owned, led by or support women.
  5. Allica Bank – Claiming that SMEs have often been left behind by the ‘big banks,’ Allica Bank combines modern technology with local relationships to ensure SMEs have the tools and the funding they need to operate. Based in the UK, Allica Bank offers SMEs asset financing, with up to £1 million worth of flexible financing options.
  6. Judo Bank – Australia’s only challenger bank built specifically for lending to SMEs, this innovative organization seeks to bring back the lost art of relationships in business banking. Created by experienced business banking professionals, they brand themselves as a ‘genuine alternative’ for SMEs who want quick access to not only funds, but the superior customer experience they deserve.
  7. First Circle – Based in the Philippines, First Circle’s mission is to enable SMEs to achieve their full potential through fast and flexible financial partnership. Their customers often have no credit data or fixed collateral and as a result are excluded from the traditional banking sector (and therefore often forced to work with predatory lenders). First Circle allows these SMEs to secure funding in as little as a day through an automated, digitized application process.
  8. Lulalend – Sixty percent of South African businesses find it difficult to access the capital necessary to grow their business, due to long wait times, painful paperwork requirements and the necessity of high collateral. Lulalend uses AI to score creditworthiness instantly, ensuring small business owners are able to receive funding within 24 hours of applying. To date, they’ve processed over 70,000 applications and secured funding for thousands of small businesses across South Africa.
  9. Siembro – Argentinian organization Siembro uses AI to power their in-house loan algorithm, providing them the ability to offer instant loan approvals for small businesses in the area of agricultural and machinery. With over 1.5 million small and medium farm businesses in the country who have limited access to credit (and limited cash flows), Siembro focuses on ensuring corn, wheat and soy farmers obtain the funding they need to survive.
  10. Iwoca – A start-up that began when its founders noticed that small businesses were getting shut out of access to much-needed credit, iwoca is now one of the fastest-growing business lenders in Europe. Working towards a goal of funding one million small businesses, iwoca wants to ensure that SMEs have more time to run and grow their business instead of being forced to fill out endless paperwork and wait for approvals.

Faster Loan Approvals

So how are all of these organizations able to do what the larger, more traditional lenders can’t? They have embraced the use of digital technology, data, and advanced analytics like machine learning and AI to a) simplify (and in many cases, completely digitally transform) the application process as much as possible and b) automate credit decisioning to provide accurate, real-time approvals, allowing SMEs to gain access to funds quicker than ever before. As a bonus, the products these innovative lenders offer SMEs tend to be more flexible and more personalized to their unique needs.

The types of SMEs out there keep changing (but there’s definitely no slowdown in sight!), and that innovative spirit needs to be nurtured as much as possible. Which means it’s great to see lenders focus their attention on these businesses, and continually find new ways to help them meet their goals. By automating data collection, risk decisioning and pricing, lenders can automate approvals and ensure funding is in hand within a matter of only days – or even hours!

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