When looking to obtain small business financing, the first place a business usually goes is to their bank. While most business owners would prefer to work with their own bank, the odds of being approved for a traditional bank loan are not always the most favorable option. In addition, a traditional loan may not be the most effective type of financing for your specific business needs. In an effort to serve customers that don’t qualify under the bank’s underwriting criteria or whose financial needs fall outside of traditional service options, some banks have formed partnerships with alternative finance companies. JPMorgan Chase & Co. and WSFS Bank of Delaware Valley are just a couple of the traditional lending institutions venturing into this new territory and more banks are evaluating the benefits of partnering with alternative finance companies, especially for small business financing.
When banks and other traditional lending institutions partner with alternative finance companies, all parties benefit. Banks are able to expand their offerings, alternative finance companies expand their customer base and small business financing becomes more accessible.
Banks
In general, small business loans are not the most profitable instruments for banks. In fact, many banks lose money on these types of loans, either from one-time costs such as origination and underwriting or ongoing expenses like loan operations, review, compliance, and monitoring. However, small business represents a segment of the customer base that provides a high level of deposits and a consistent income from both the business and the business owner. Not retaining this segment of the customer base would be a lost opportunity.
Partnerships with alternative finance companies enable banks to provide alternative small business financing options while improving operating expense ratios, increasing revenue and enhancing the customer experience. They also allow the bank to take advantage of financial technology, commonly known as fintech, without the huge upfront expense of building their own technology platform. Fintech offers a swift, more in-depth analysis of creditworthiness, giving banks the ability to make better financing determinations in significantly less time than traditional methods.
Small Businesses
By partnering with alternative finance companies and leveraging the power of fintech, banks can provide their customers with more small business financing options and a faster application process. The expanded and accelerated access to financing provides business owners with working capital when they need it most. This not only enables the businesses themselves to take advantage of growth opportunities as they arise – business growth benefits and strengthens the community as well.
Alternative Finance Companies
As previously mentioned, forming partnerships with banks and other traditional financial institutions offers alternative finance companies access to a larger customer base. Although alternative financing has existed for quite some time, the gap in small business financing caused by the recession of 2008 created a surge of alternative lenders and financiers. Not all of these were trustworthy, and some sullied the reputation of the industry, making business owners leary its services. Today’s partnerships help restore that reputation as those seeking financing feel confident working with an alternative financing company via their bank or trusted financial institution.
There are a few different ways to partner with alternative finance companies. Banks can take advantage of fintech as a third-party software-as-a-service, typically referred to a SaaS, or they can purchase assets originated by an alternative financier. One of the most common ways is to engage in a referral program. These programs offer additional revenue from referral fees, little up-front investment and the ability to build and retain a lasting relationship with your customers.
Capflow Funding Group is an alternative finance company specializing in factoring. Our referral program is open to businesses or professional individuals as well as banks. If you have business customers who require financing that falls outside of your services and think we could help, contact us today. Let’s work together to get your customers the small business financing they need.
Customers are the lifeblood of any business and probably the most powerful force fueling small business growth. Attracting new customers can sometimes be difficult and keeping them can be an even bigger challenge. If despite your best efforts, you’re not seeing your goals realized, these tips could help increase your customer base and stimulate small business growth.
Your existing customers know who you are and where to find you but what are you doing to help make new customers aware of your business? In order to stand out from the crowd, you need to up your game when it comes to marketing.
In today’s competitive marketplace, that means having a strong online presence. You need a website that is up-to-date with relevant content and is also user-friendly. Also, having a site that is mobile friendly is no longer a luxury, it’s a necessity. Don’t forget social media. Find out which platforms are popular among your target audience and get social.
As with any new relationship, it’s extremely important to make a good first impression. A new customer’s initial impression could make the difference between a one-time transaction and a long-term relationship. Even though you strive to always give the best possible service, with a new customer you want to exceed rather than just meet their expectations.
Offer an additional free service such as gift wrapping or expedited delivery. Provide a coupon for a discount on their next purchase. It is also beneficial to engage customers in a conversation to learn a little bit about them. If the first time transaction is online, offer free shipping for that purchase or a discount on a future purchase. Be sure to follow up with a thank you email.
Just like your website, it’s important to keep your business technology up-to-date as well. With today’s busy schedules and on-the-go lifestyles, customers appreciate hassle-free transactions. Complicated online purchases or slow, antiquated POS equipment can discourage repeat business.
If you are a B2B company, offer online invoicing and payments, allowing your customers to get back to their business. Providing customers with efficient service that permits them to get what they want and get on their way quickly will help create customer loyalty and repeat business.
Do you do business with similar but non-competing companies? If so, this can provide you with an additional opportunity to increase your customer base. Network with these companies and set up a plan to refer customers to each other should either business be unable to provide what they need. Not only will this be a source of new customers. It will also help strengthen and build lasting relationships with the cooperating businesses.
This is more important than ever with online reviews. Studies have shown that 97% of consumers looked online for local businesses in 2017. Moreover, 12% looked for a local business every single day, and 85% trust online reviews as much as personal recommendations. When a customer expresses their satisfaction with your business and customer service, politely ask them to leave you an online review. It’s no different than asking them to tell their friends!
Efforts to increase your customer base take time and in many cases, money. If unpaid invoices have you lacking the capital necessary to implement a strategy to attract new customers, CapFlow Funding Group may be able to help.
We specialize in factoring to provide businesses with short-term working capital. We also partner with other lenders to provide funds for businesses that require financial services other than ours. Contact us today and find out how we can help you grow your business.
