Small businesses are the backbone of the U.S. economy and present a big opportunity for financial institutions, particularly now. Despite years of sluggish growth, we’re currently seeing steady increases in entrepreneurship with signs of continued growth ahead. In fact, the NFIB Small Business Optimism Index soared to 108.8 in August – a new record in the survey’s 45-year history, topping the July 1983 mark of 108.
According to NFIB President and CEO Juanita D. Duggan in its August report, “Today’s groundbreaking numbers are demonstrative of what I’m hearing every day from small business owners – that business is booming. As the tax and regulatory landscape changed, so did small business expectations and plans. We’re now seeing the tangible results of those plans as small businesses report historically high, some record-breaking, levels of increased sales, investment, earnings, and hiring.”
Traditionally, banks have been slow to deliver on innovation to small business customers, but to be competitive in this growing market, they must look for new ways to transform their processes and improve the small business borrower experience. And it starts with data.
Banks must ask themselves: “How are we getting the data and how can we get the data into our systems more efficiently?”
To take advantage of small business growth, banks must invest in tools to automate the gathering and standardization of a borrower’s financial data. Otherwise, they are approving or denying a SMB’s loan application based on partial, out of date information, and therefore, likely missing out on opportunities due to inefficiencies. For instance, investments made in other technologies to improve loan processing will be of limited benefit without the right data.
Banks must determine a way to meet borrower expectations and offer fast, reliable service – or risk losing customers to alternative lenders. Financial data sharing APIs are helping financial institutions do just that. Alternative lenders are already connecting directly to their SMB clients’ accounting package via APIs. Other early adopters are also moving away from legacy systems and towards API technology.
For banks to differentiate, gain a competitive edge and drive positive change throughout the entire lending process, complete financial data must be examined.
In our whitepaper “The Data Enabled Lender“, we offer insights on how financial institutions can transform their SMB lending processes, explore how outdated SMB borrower data leads to inefficient processes and puts the lender at greater risk, and discuss ways to drive efficiency, minimize risk and gain a comprehensive understanding of your SMB clients.