Financing Small Businesses

How “New-form Lending” will reshape banks' small business strategies.

A new approach to small business lending is emerging in US banking. In our latest report, Financing Small Businesses, we refer to this new approach as “new-form lending”. It is based on a simple but powerful insight: the data in a small business’s checking account can be a strong real-time indicator of that business’s creditworthiness.

We believe that this new approach will rapidly be adopted by all major US banks and become the basis for satisfying what has mostly been an unmet need for short-term cashflow financing for small businesses. Industry-wide, this could be a $2 BN profit opportunity for lenders.

New-form lending will also help improve banks’ traditional loan underwriting processes by lowering unit costs and improving risk differentiation. Additionally, new-form lending, by improving the whole approach to SB lending, will strengthen banks’ overall value proposition, allowing them to win and retain the most attractive small business relationships.

Financing Small Businesses