While small- and mid-sized enterprises took some big hits during the COVID-19 pandemic, many were kept afloat thanks to government subsidies, such as grants and low-interest or interest-deferred loans. As government support programs now begin to dwindle, SMEs are facing the next phase of the pandemic, one where a unique set of factors is making access to cash critical.

Rising inflation, supply chain disruptions and geo-political uncertainties have placed a challenging financial mantle on SMEs. A recent survey reveals that 93% of companies receive late payments, a fact of doing business that negatively impacts cash flow. Close to three quarters of businesses say it’s never been more important to receive timely payments from their customers.

As SMEs seek ways to protect cash assets and shore up cash reserves, banks and lenders are key to their efforts, by providing lending products that will float the business through rough waters. However, a survey of business owners conducted by PwC reveals that banks may not be in the sweet seat for long. Nearly half of survey participants would consider alternative options to support working capital, including crowdsourcing or switching banks.

What’s a bank to do? Meeting the rising trend of SME loan requests requires financial institutions to make better use of technology and redesign the SME lending experience.

Meeting the rising opportunity in SME lending

SMEs expect a different experience than the one they received from their financial institution prior to the pandemic. Cumbersome applications and slow decisioning cycles won’t keep SMEs sailing as the waters get rough. To gain and maintain SME accounts, banks will need to address three factors.

• Digital first: A global study reveals that a quick online application is the most desirable feature of the credit process for SMEs in the majority of countries surveyed, but the technology expectations don’t stop there. More than half of SMEs would like to be funded within seven days, and 26% would be willing to pay for it, requiring financial institutions to digitize processes for optimized performance end to end.
• Personal engagement: According to EY, many SMEs find bank lending products unattractive, lacking the personalization opportunities they need to make the financing effective. However, emerging technologies open new doors to more targeted data insights. Banks can use analytics to identify opportunities and adapt offerings as needed.
• Credit decisioning: The use of data doesn’t end with product personalization. Utilizing a platform approach to technology development, financial institutions can also integrate services that can be marketed to SMEs, such as accounting software. The advantages here are two-fold.
  The bank realizes greater customer engagement and loyalty from the SME by offering products that simplify their internal financial operations. Financial institutions also realize instant access to current financial data from these systems, gaining real-time insights that offer greater predictive capabilities, for more personalized credit decisioning.

As SMEs continue to adapt to the emerging financial environment, banks stand to capitalize on a $66 trillion opportunity. Technology will lead the way toward this new future and ensure smooth sailing for both banks and SMEs.

Discover how our lending engine can help SME lenders adapt and scale, or download our Disruption Diaries report Small businesses, big growth on SME lending and banking.