Every business large or small has stumbling blocks when starting out, but whatever the sector, whatever the industry, there are three main pillars that apply to both SMEs and larger corporations: they all buy, operate and sell. All businesses need money to get off the ground, purchasing the necessary tools or equipment to launch a successful venture, and they all spend time developing the service or product they specialize in before selling it to their market.
It’s important for banks to understand each of these 3 vital stages, and offer the tools that support SMEs at each juncture.
A good start to any business venture will define how well things go in the future.
In particular, access to credit is the lifeline for more than 75% of new companies. Credit is vital for expansion, initial purchases and even hiring staff, and is the basis for running a successful business, especially for start-ups. There's always a little investment required from the onset, however small the business, but accessing credit is often complicated.
In short, if banks don’t know how likely SMEs are going to be able to make repayments on loans, they’re likely to reject the application. There’s no background information on brand new companies, so how do entrepreneurs get round the money issue?
SMEs on the whole opt for alternative lenders such as Zopa or Kabbage as a way of kick-starting their company, as these offer both the smaller quantities and the hassle-free cash injection where banks fail to offer the solutions that fit with their needs.
Thanks to SME digital banking solutions such as BFM, banks can be on their business customers' side where no credit history or data is available, offering cost-effective lending and on-the-spot assessment, armed with AI and consumer insights.
SMEs can also now negotiate better terms and offer greater variety of payment methods and facilities to their customers thanks to these new digital banking solutions available. Strands' partnership with Mastercard means new payment methods are now an option for SME banking customers, and opens up new international markets to them.
SMEs have the option of using credit cards for B2B transactions and unlocking the free working capital this offers them, plus the added benefit of paying large expenses by instalments, helping them out of a tight spot when they need it most.
After money, hands down the most important commodity when running a small business is time. As an SME owner, this means time to juggle admin, strategy, production and customer care all in a day's work, which is now where the bank can step in, and take some of the pressure off the financial side of things.
For example, automatic reconciliation between bills and invoices with bank transactions - currently a very time-consuming process - is now no longer an issue for the business owner. BFM helps SMEs to stay on top of late payers automatically without having to manually contact each individual client, and have a clearer picture about which payments have been made and which are still outstanding.
An overview of financial wellbeing, a look at what's to come, and a helping hand when it's needed all make the bank one of the best business partners a up-and-coming CEO could wish for.
Organized, more-efficient money management, better payment terms and if the worst happens and payment comes late, the foresight banks now have about future invoices means they can step in and offer a bridge loan to ensure SME customers don’t run into cash flow problems.
The sort of knowledge about customers that allows personalization of services and highly-targeted messages and offers, is the kind of knowledge that banks now have about their business customers.
Banks offer retailers a clearer picture of their clients' needs, resulting in better and more-tailored products and services, greater revenue and a higher influx of quality customers.
Thanks to AI-powered insights, everyone in the chain has more insider information about user habits. The SME now has the personalized banking service they’ve always needed, they’re more financially fit than ever, and more able to make their business flourish, safe in the knowledge that the money side of the business is taken care of.
The result? Happy and loyal SME banking customers, and banking that makes good business sense.