How Credit Unions Fuel A Collaborative SMB Lending Experience

Though big banks may dominate the small business lending market, an influx of SMB lending technological innovation has opened up the landscape for smaller and alternative players to compete — often together.

Indeed, collaboration is key to combining resources and filling in market gaps that the largest banks are unable to fill. Not only does that mean access to working capital, but it can also mean filling the need for personalized advisory services — a feat that can be particularly difficult for big financial institutions.

Collaboration is also essential to fulfilling small businesses’ capital needs, as Kevin VanKampen, vice president of business banking at Canada’s Meridian Credit Union recently told PYMNTS. He discussed the FI’s recent partnership with alternative small business lender Thinking Capital, and the role that partnerships between FinServ providers, as well as between providers and their small business customers, play in aiding the recovery and resiliency of the SMB community.

Driving The Collaborative Spirit

Small businesses’ banking expectations are expanding as entrepreneurs increasingly seek digital-first experiences from their financial service providers. But as VanKampen explained, digital isn’t the only item on their wish-list.

Small business owner are seeking financial products that they can access more quickly in a digital-first setting, be that desktop or mobile device.

“At the same time, they still want to be able to have the opportunity to talk to somebody as well,” added VanKampen. “There is a shift towards digital — it’s how they want to interact — but they still want to have a personal touch when they need it.”

In this regard, he said, credit unions can often be more agile than the big banks to provide that personalized experience for SMB members. It’s typical of the credit union experience for businesses to develop a relationship with a member of a credit union’s team, and to keep working with that individual on a regular basis, for instance.

This collaborative spirit between credit union and small business owner can be found throughout the CU landscape, according to VanKampen. Meridian’s partnership with Thinking Capital, with aims to accelerate and expand access to capital for small businesses, is one example. At the same time, credit unions themselves often work together to share knowledge and best practices, using their collective presence to compete against the business banking giants.

“With credit unions, we don’t see each other as competitors,” said VanKampen. “We really do try to collaborate, share resources, and share successes.”

The Next Generation Of SMBs

Industry collaboration will continue to be an important tactic in addressing the quickly-shifting needs of small businesses amid a precarious moment in economic history.

One of the motivations behind Meridian’s Thinking Capital partnership was to accelerate access to capital for SMBs, because as VanKampen noted, business owners need to be able to act fast in order to capture the most lucrative business opportunities.

“The more nimble we can be in providing them an answer, the more nimble they can be in making business decisions,” he said.

That being said, the unfortunate reality of today’s economic climate is that not every small business will survive. That doesn’t necessarily mean demand for small business capital will decline, however. On the contrary, VanKampen said he sees a powerful opportunity for Canada’s small business community to regenerate and reinvent itself as economic recovery in a post-pandemic world progresses.

As such, collaboration will continue to be a vital theme for the small business lending space — including collaboration between credit unions, FinTechs and small businesses themselves.

Looking ahead, VanKampen predicts a surge in new small businesses stepping onto the scene to fill the gaps left by the businesses that were unable to survive the pandemic and economic volatility. Pointing again to the Thinking Capital partnership, he noted that the tie-up allows small businesses that have only been in operation for six months to access capital — unlike traditional lending models, which can typically require two years’ worth of financial statements.

For credit unions, being able to position themselves as a resource to finance the newest market entrants will be key to promoting economic recovery.

“For anyone who has an entrepreneurial spirit, it will be a great opportunity to come in and fill a need,” he said. “I think we’ll definitely see a lot of people going into business for the first time.”