Two years ago, bank approval ratings were close to double what they are today. The economic long-term shock of the pandemic has driven many small and medium-sized businesses (SMBs) to become more conscious of how they can access financing when they need it.
According to iwoca’s Q4 SME Expert Index, published earlier this month, the financing ambitions of SMBs have shifted beyond pandemic recovery, instead opting for ‘financing for growth’.
According to its data, 26 per cent of brokers say that loans valued between £100,001 and £200,000 are the most commonly requested among their SMB clients, increasing by 17 per cent since Q3, when fewer than one in ten loan requests were of this size.
However, the data of Biz2Credit’s Small Business Lending Index suggests that the funding isn’t so forthcoming. In January 2020, on the eve of the pandemic, big banks were approving 28.3 per cent of the loan requests they received, while small banks approved 50.4 per cent. Non-bank lenders were even more prominent two years ago, with institutional lenders stamping 66.4 per cent of applications, alternative lenders agreeing to 56.1 per cent, and credit unions saying yes to 39.6 per cent.
Two years on, and the Index’s outlook isn’t quite so bright, although it does suggest that lending rates are on the upturn. In December 2021, big banks were approving 14.3 per cent of loans, whilst figures picked up slightly when they approved 14.5 per cent in January 2022. Small banks’ approvals also rose during this period, from 20.1 per cent in December to 20.3 per cent in January.
Institutional lenders have also been upping their approval ratings, from 24.9 per cent in December to 25.1 per cent in January. Alternative lenders approved more ratings over the same two month period, from 26.1 to 26.3 per cent respectively; however, this is still a massive fall in lending from their 56.1 approval rating two years ago.
For what traditional lenders are missing in their offerings, perhaps due to the larger loans required or larger market uncertainty, fintech has come to fill the gaps. We see now how new SMB funding streams are flowing from fintech faucets, including Trade Ledger’s partnership with Australia and New Zealand’s largest non-bank SME lender ScotPac, the rise of Buy Now, Pay Later (BNPL) capital funding schemes for SMBs, and in the partnership of Funding Options and Wise.
There are even solutions that aim to streamline the SMB remittance market, including this DeFi solution by ShuttleOne.
And now, in yet another boost to fintech-led funding for SMBs, business credit platform Tillful has announced that it is to work with both Highnote and Mastercard to launch the Tillful Card, a first-of-its-kind business credit card purpose-built for SMB owners to help increase their access to credit and growth capital.
Sherri Haymond
“Access to fast, secure and convenient payments is critical to small business owners building and growing their businesses,” shares Sherri Haymond, Executive Vice President, Digital Partnerships at Mastercard. “As the small business segment continues to digitally transform and evolve, it is imperative to provide solutions that work harder for them and their operations – making the Tillful Card more relevant than ever.”
Launching in early 2022, the Tillful Card aims to serve new and emerging businesses as well as underbanked and underrepresented SMB borrowers. This historically ‘credit invisible’ segment of SMB borrowers tends to face more challenges to stay in business due to lack of credit history, which decreases their access to credit from lenders.
The Tillful Card will enable SMB owners to maintain and grow their businesses in several ways, including:
Reports payment history to credit bureaus to help build business credit quicker;
No minimum bank balance requirements for approval;
Option for monthly payments compared to fixed daily or weekly payments.
Leveraging Flowcast’s AI-powered credit risk assessment, Tillful utilises real-time, alternative transaction data to build a more accurate picture of an SMB’s creditworthiness.
Ken So
“Tillful’s core mission is to make the credit ecosystem accessible to the Main Street small businesses who are overlooked for financing opportunities by conventional banks and lenders,” said Ken So, CEO and co-founder of Tillful. “In Highnote and Mastercard, we have technology partners as equally customer-obsessed as we are, that together are building innovative solutions to help SMBs build credit and achieve their full potential.”
John Macllwaine
“We built Highnote to be a truly modern card issuance platform, one that lets any visionary company, from startup to global enterprise, create, iterate, and scale innovative embedded card issuance experiences to grow customer loyalty, engagement, and revenue,” added Highnote’s co-founder and CEO John Macllwaine. “Now, in partnership with Tillful, we’re excited to help Main Street SMBs gain access to the credit they need to build tomorrow’s best companies.”
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