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Ten Companies Embracing the Challenge of SME Lending

October 13, 2021 | Allison Karavos

Supporting Small and Medium Enterprises in Unique Ways

Micro, small and medium enterprises (MSMEs) are the economic darlings of the economy. They’re innovative, agile and drive competition. However, they’re often shuffled to the bottom of the pile when it comes to accessing credit as lending to SMEs can be inherently risky. Traditional financial institutions often require a paperwork-heavy application process and may find it difficult to execute credit risk decisioning without human intervention.

44% 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 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.

  • 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.
  • Banco BHD Leon – Launching their Mercado de le Mujer initiative in 2015, this bank in the Dominican Republic has distributed more than $150 million in loans to female entrepreneurs. They’ve also expanded training efforts, mentoring and networking opportunities for women entrepreneurs in the country.
  • 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.
  • 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.
  • 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.
  • 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 agriculture 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.
  • 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.
  • Funding Circle – With fast, affordable business loan programs, Funding Circle has built a machine learning and technology platform that aims to change the way small businesses access critical funding. Their customers can complete loan applications for a variety of types of business loans and get approval in mere minutes – and to date the company has helped more than 118,000 small businesses access more than $17.5 billion in funding.
  • Biz2Credit – Founded in 2007, Biz2Credit works towards making business finance work better. Providing over $7 billion in small business loans, to thousands of companies across the United States, Biz2Credit offers a proprietary technology platform that matches SMEs to the capital sources that suit them best and helps automate the entire lending process.
  • OnDeck – With an application process that can take as little as ten minutes, and a decision on funding received back the same day, North American OnDeck provides tailored options including varying loan times and repayment terms to its customers. Founded in 2006, the company has extended $13 billion (and counting) in funding to small businesses, thanks to their use of data analytics and digital technology to aggregate and analyze thousands of data points, helping them quickly and accurately assess the creditworthiness of a variety of types of SMEs.

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, machine learning and advanced analytics to a) digitize the application process as much as possible and b) automate the credit decisioning process to provide accurate, rapid approvals, allowing SMEs to gain access to funds quickly. 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, and that innovative spirit needs to be nurtured as much as possible. Which makes it a joy to see lenders of all types 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, these lenders can automate approvals and ensure funding is in hand within a matter of mere days – or even hours!

Want to find out more about how to increase SME loan approvals without increasing your risks? Check out our eBook and explore the four key components needed to build world-class SME lending experiences.