One of the first decisions entrepreneurs make is who to bank with.
Often that choice starts at home, with
8 in 10 SMEs using the same bank for professional purposes as they do for managing personal finances.
Naturally, many business leaders then turn to that same banking partner for further financial advice…but is this the best way to work?
1 in 5 small businesses sought guidance from their current account provider in 2019.
However, these banks have a vested interest in helping SMEs to take out their in-house financial products – even if they aren’t the best fit.
Instead of automatically turning to the same bank for all finance needs, business leaders need to be setting their sights further afield, looking for market-leading financial services products, rates and terms.
This best-in-class approach is the ideal way to build effective funding support, in order to enable rapid and sustainable business growth.
Why do SMEs turn to their business banking partner?
For many small businesses, when it comes to financial services, their mindset is ‘better the devil you know’. From a customer experience perspective, it can certainly feel easier to source all products through the same provider, but this means that many SMEs are potentially missing out on the best possible deals.
Just because a bank offers a great current account service, doesn’t mean they are the best option for other financial products, such as business loans. In-house finance experts will steer company directors towards their own products to grow their value as a customer.
Yet the terms and rates of big bank business loans often don’t meet the needs of SMEs as well as more flexible opportunities being offered by alternative finance providers.
Access to alternative business finance
Rather than taking the ‘everything under one roof’ approach, SME leaders could benefit from adopting a different stance, in which they consider all their financial needs individually. This will allow them to find specialised providers in each area, building a best-in-class portfolio of business finance products.
Up until now, the major obstacle to taking a best-in-class mindset has been finding finance providers that offer a genuinely more attractive alternative.
However, the fintech market’s rapid development is changing the game.
Year on year, innovative new financial services companies like WeOwn are starting up, which offer a radically different, technology-led approach to business finance.
And with the global fintech market set to grow by 22% between now and 2025, alternative providers will only increase their influence.
Fintech challengers are well suited to the needs of SMEs. For example, WeOwn’s model taps into the fact that small businesses are run by busy people, run a lean operation, and evolve very fast.
This means access to capital needs to be quick and seamless – so we’ve used blockchain technology and tokenisation to remove all the middlemen and paperwork that make accessing funds slow, expensive and complex.
We’ve replaced traditional business finance models with a digital marketplace that makes it easy for SMEs to connect with investors, whether they are seeking an equity raise or business loan.
The challenger bank opportunity
While some business owners like their creature comforts, there is an appetite among some SMEs for a better way of accessing finance.
This is seen in the fact that some are choosing to open current accounts with a challenger bank, rather than the major bank they may have used personally for several years.
Challenger banks understand the need for a modern, digital-first approach to banking, along with a consumer-friendly attitude.
And, as they expand their financial product range, it will become easier for small business to source best-in-class services through these emerging influencers.
Many challenger banks are technology-driven in their model and already use open banking platforms, which makes it easier for them to partner with fintech companies and ‘plug in’ new financial services for business customers to use.
For example, WeOwn’s software-as-a-service (SaaS) platform can be integrated straight into banks’ existing infrastructure, so they can start offering peer-to-peer lending and equity fundraising services to their customers.
For more about this opportunity, read our blog post: challenger banks are perfectly poised to rip up the business lending rule book.
Finance shouldn’t be a compromise.In an ideal world, SMEs will be able to pick and choose the financial products they need from a range of online options, and access them in an easily connected manner. This puts the focus on accelerating business growth – not securing suitable funding.
WeOwn is determined to help entrepreneurs achieve this, by developing a SaaS model that delivers all the benefits of working with a highly competitive provider in the P2P loan and private capital raise space, yet can be accessed through the wider banking network.
We believe that financial support shouldn’t be a compromise for small businesses.
Instead, it should be an opportunity for SMEs to collaborate with the best providers, to get the exact resources they need, at the best rate, to thrive in a competitive market.
Join WeOwn’s online marketplace for free to discover new routes to business finance.