Up until recently, big banks have steered clear of small business lending. This is largely due to the financial meltdown of 2008 as well as increased regulations. It just doesn’t pay to underwrite a small loan for a small business at the same cost on the front end as underwriting a big loan for a big business. Especially when only the bigger loans can generate enough profit to even be worth the hassle. So big banks bailed on the little guys because they needed to squeeze as much profit as they could out of loan ventures.
Unfortunately for small businesses, just because banks are bailing on them doesn’t mean they suddenly do not have a need for quick capital. Lucky for them, alternative lenders and start-up companies have since filled the void. As this new type of business lending for smaller companies has emerged, so did new technologies and lending models that have once again made it profitable to lend to small businesses.
Well, well… Guess what? Big banks want back in now.
JPMorgan Chase recently signed on with OnDeck to create digital small business loans for its customer base. More banks are partnering with alternative lenders and deals are being set in place today. Not every bank though, Bank of America has firmly said that they will not be partnered with online or alternative lenders because of the risks of damaging their reputation.
JP Morgan Chase is going to integrate OnDeck’s technology into a small business checking account in order to speed up the process by which the pre-screened borrowers and merchants can receive their funding. So even though OnDeck will be behind the entire operation, it’s the JP Morgan Chase name that will be on the product. Expect this trend to persist throughout all partnerships between alt-lenders and big banks.
So in conclusion, big banks are coming home with their tails between their legs. This represents the true strength of the field of small business lending. That banks were so threatened and so worried about missing out on a profitable market that they have now partnered with the companies that their initial negligence birthed. Sort of ironic.
Working With Sprout
Sprout is an online marketplace where businesses come to compare and save on small business loans. You go to www.SproutLending.com and simply fill out a profile or call us at 800-865-6057. Based on that information you provided, Sprout suggests the best matches depending on the amount and purpose of the business loan you are seeking. Last year, Sprout and it’s staff was responsible for over $100 million in loan approvals.
To speak with a funding specialist now, call: