Small Businesses: The Underserved Driver of the US Economy
I continue to be amazed by the importance of small and medium sized businesses (SMBs) to the US economy. SMBs drive the majority of job growth in the country and account for 91% of all exporting companies and 89% of all importing companies according to the most recent US Census. I’m equally surprised at how many financial institutions continue to miss the mark in catering to these businesses.
Access to financing is the lifeblood for many businesses. However, the NY Fed reported that business applicants five years old or younger were more likely than mature applicants to face financing shortfalls and difficulty accessing credit, even when they had comparable credit scores.
Interestingly, large banks are worse at serving the financing needs of SMBs than other lenders. A June 2018 report by Biz2Credit found that large financial institutions (those with assets over $10 billion) approve barely 25% of SMB loan applications. This means that almost three quarters of small business loans are declined at large banks.
Smaller banks do a much better job of serving this segment, approving loans at almost twice the rate of large banks (49.6%). Best of all are the alternative lenders, approving 56.5% of small business loans. Clearly the smaller banks and alternative lenders are much more attuned to the needs of small businesses.
Unfortunately for SMBs looking for a letter of credit, they face an uphill battle. Today, letters of credit are only offered by large banks. And as we’ve just seen, those large banks do a really poor job of serving small and medium sized businesses.
With TangoTrade, SMBs can access financing from SMB-friendly lenders and then use these funds to secure their payment to suppliers overseas. Instead of relying on large banks, SMBs now have a better alternative to transact with overseas suppliers than the dusty old letter of credit.
~Scott Reynolds, CEO, TangoTrade