We live in an on-demand, hyper-personalized world, and we have for some time.
As consumers, we’ve come to expect customized experiences tailored to our preferences, needs, and desires. Recently, this desire for personalization has extended beyond consumer goods/services, and can now be found in most B2B industries, including financial services.
In 2023, small and medium-sized businesses (SMBs) are not very different from the average consumer.
In the quest to fulfill their financial goals, they seek bespoke commercial lending experiences that not only meet their needs but reflect their organization’s mission, vision, and goals. They are tired of cookie-cutter experiences.
Although this fact is widely known and accepted, many banks continue to cling to “one-size-fits-all” lending models.
In this article, we’ll journey through the rapidly changing landscape of SMB borrower expectations. We’ll reveal how automated lending platforms can empower lenders to create deeply personalized, impactful experiences that nurture borrower relationships and pave the way to sustainable success in today’s hyper-competitive lending market.
Borrower Preferences Have Evolved
Lending has gone through major shifts, and they all have to do with the evolving expectations of borrowers.
In this section, we will take a look at how the needs and preferences of SMBs have evolved over the years—and how they’re shaping the future of lending.
Accessible Funding, Faster
Rigorous application processes. Strict credit requirements. Drawn-out approval processes.
When it comes to funding SMBs, traditional banks have often fallen short—and are only getting worse. In early 2023, approval rates for small business loans hit a record low of 13.8%.
In this context, small business owners are increasingly turning to non-bank/fintech lenders. Eager to support SMBs on their financial journey (and to provide a compelling borrower experience), these alternative lenders deliver more accessible and flexible funding options, as well as significantly faster service.
Just how popular is alternative lending proving to be?
Here’s an impressive stat for you: in 2022, the total worth of the global alternative financing market was estimated at $10.82 billion, and experts predict a 20.2% year-over-year growth through 2030.
Shifting Demographics
It’s official: Millennials are now the largest generation in the U.S., at more than 72 million.
And within the group, about 60% identify as entrepreneurs.
The wave of young entrepreneurs keeps coming: nearly two thirds of Gen Z Americans have already started—or plan to start—their own businesses.
This fresh cohort of entrepreneurs comes along with a unique set of needs and priorities.
Of course, they desire financial stability, profitability, and quick application processes for funding—just like their older counterparts. But what really sets them apart is their keen focus on streamlined digital experiences across every aspect of their business.
In fact, 64% of Gen Z conduct at least half of their business operations right from their phones. As such, online platforms, mobile apps, and digital tools have become indispensable for connecting with these tech-savvy business owners.
A Growing Call for Transparency
It’s not just younger people—the demand for trust and transparency from lenders cuts across all generations.
Regardless of age, SMB borrowers hold honesty and open communication in high regard, and they won’t settle for anything less.
A study by the Federal Reserve showed that the most popular SMB grievances revolve around banks failing to provide clear information and using confusing terminology.
These complaints highlight that it’s essential that lenders provide:
- Comprehensive information throughout and beyond the loan origination process.
- Details that have traditionally been kept “hidden” from borrowers.
- Terms and conditions in a simple and understandable way.
In other words, ensuring transparency involves more than ticking regulatory boxes—it’s also about building trust and nurturing long-lasting relationships with SMB borrowers.
The Power of Technology
Providing a run-of-the-mill customer experience doesn’t cut it anymore—small business owners are looking for personalization.
SMB owners (especially those from younger generations) want financial partners who understand their unique needs. And they also expect products that address the specific challenges they face at different stages of their business journey.
That’s where technology comes in. In fact, it’s become the driving force behind success in the commercial lending industry.
A modern SaaS lending platform offers lenders exactly what they need to not only cater to their borrowers’ tech-driven preferences, but also the power to more efficiently manage lending workflows from onboarding to underwriting to closing.
With smoother operations and more time on your hands, you can focus on what truly matters: nurturing authentic relationships and providing personalized attention to each borrower.
Indeed, by connecting on a human level, you’ll uncover a deeper understanding of each of your borrowers—their backgrounds and what drives them. As a result, you’re empowered to make better decisions and better address their unique needs.
The Benefits of Personalized Lending
The shift towards personalized lending brings with it an array of benefits, serving as a powerful tool to not only attract but also retain valuable SMB customers. Here are three of the benefits SMB lenders can expect.
Improve Engagement, Loyalty, and Retention
By tailoring financial solutions that meet the unique needs and circumstances of each SMB, lenders show their dedication to understanding and supporting business growth.
This personalized approach fosters trust and loyalty, resulting in long-term partnerships with borrowers.
Plus, by leveraging modern technology, lenders can streamline the loan application and approval process, making it easier and more user-friendly for SMB borrowers.
Streamline Risk Management
Put simply, automated lending software makes risk management easier.
It leverages AI, ML, and decision engines to create custom credit scoring models that accurately evaluate the risk profiles of different SMBs. With this data-driven approach, lenders can make more informed decisions and minimize the risks of defaults.
This helps build a diverse loan portfolio, as lenders can spread loans across various sectors and types of businesses, and ultimately reduces the overall risk for the lender. Even if some loans default, the successful loans in the portfolio will offset potential losses.
Champion Inclusive Financing
When lenders embrace a personalized lending strategy, they open up access to credit for underserved and underrepresented SMBs.
This isn’t just about equal access, it’s about promoting financial inclusivity, stimulating economic growth, and creating more job opportunities.
By being champions of the “little guy,” lenders can earn a stellar reputation and foster goodwill within the communities they proudly serve.
Increase Revenue
Done effectively, personalization has the ability to help companies generate 40% more revenue.
More specific to the banking sector, McKinsey has found that firms that put customer value at the center of their personalization efforts generate 5% to 15% higher revenues from their enhanced campaigns, while expediting their time to market.
While it is important to note that these studies focus on retail banking, our experience at SPARK has taught us that the same logic applies to SMB/commercial lending.
3 Ways SPARK Personalizes the SMB Lending Experience
A SaaS lending platform, such as SPARK, is a game-changer when it comes to personalization and creating tailored lending experiences.
Below are three ways SPARK’s customer-centric lending automation platform can drive your personalized lending strategy.
1. Name-Based Personalization
Of course, you need to use an applicant’s legal name for documentation.
But if the owner, say, Alexandra, goes by “Alex,” you should be able to personalize messages using the nickname in emails and other forms of communication. This attention to detail goes a long way in making your customers feel like people instead of numbers in a system.
Plus, you can see exactly what your applicant sees, creating shared understanding. And because applicants can access the SPARK platform too, you can collaborate digitally, creating stronger engagement.
2. Borrower Communication/Collaboration
The loan origination process can typically take up to three months. This is incredibly long for SMB owners who are used to quick experiences in their lives as consumers.
If you can’t speed up the process, you at least need to keep applicants informed.
SPARK is a shared environment where users can see and collaborate on the same accounts in real-time. And most importantly, SPARK allows you to be transparent with end customers. They can see:
- Who is working on their loan process.
- What stage their application is in.
- Which documents have been submitted.
Plus, lenders can choose to view what their applicants see within SPARK, so they can put themselves in the customers’ shoes. This level of transparency leads to greater understanding, perspective, and engagement on both sides.
3. White-Label Brand Recognition
Consumers today are used to slick apps with touchscreen functionality—not generic desktop software.
Cloud-based, white-label solutions allow you to brand the platform with your organization’s logo. It may seem like a small thing, but it goes a long way to build brand recognition.
It helps customers feel like they’re in the right place, while also creating a sense of credibility and consistency across the entire lending journey.
SPARK: Personalization for Borrowers and Lenders
Why take the time to personalize experiences? Because the world has changed.
Borrowers expect it—if they don’t get it, they are all too happy to find other options.
Making lending more personal strengthens relationships and builds lasting trust, paving the road for repeat business.
But personalization isn’t just about your borrowers. At SPARK, we also personalize your experience as a lender by:
- Assigning you a dedicated customer success manager.
- Valuing your input for platform development.
- Providing ongoing advice and guidance.
- Offering unparalleled configurability.
Discover the power of SPARK’s automated lending platform by scheduling a demo today.
Let us show you how personalized lending can transform your business.
