Most American businesses are smaller businesses, employing nearly half of all U.S. workers, according to the Small Business Administration.
Even the COVID pandemic — and its resulting economic decline — was not powerful enough to keep those businesses from launching. More small and medium-sized businesses (SMBs) opened their doors in 2020 than in 2019.
While these businesses make up a key part of the world economy, their lower loan values and greater risk for failure have traditionally left them underserved by the financially industry.
But that’s beginning to change. Legacy financial institutions (FIs) have in recent years begun to view SMBs with more interest, as FinTechs, neobanks and other digital-first players have tried to woo mid-sized companies with convenient loan products and online banking tools.
The Late Payment Headache
And what do SMBs want from their banks? Decision-makers at these companies are seeking the same fast and convenient digital service they enjoy as customers, particularly as small businesses become more and more reliant on seamless payments.
Delayed payments from customers and industry partners have become a major concern for SMBs, with PYMNTS research showing that 14% of B2B receivables were overdue at companies taking in less than $50 million in annual revenue in 2020.
And a 2020 study by Mastercard found that the pandemic forced 82% of SMBs in the U.S. to change the way they receive and send payments, with half adding a digital service to collect funds and ease cash flow problems.
The study noted that cash flow became an issue for SMBs as the COVID crisis exacerbated many of their payment frictions. Almost half of all SMBs were one missed payment away from going out of business.
By February of 2021, SMBs remained on unsteady ground, according to one study, as 80% reported they’d need social or financial support to survive another lockdown, even though 74% of them called themselves “financially resilient.”
Want to learn more about this topic? Download your copy of the Next-Gen Commercial Banking Tracker, a PYMNTS and FISPAN collaboration.