Small businesses are underserved by banks — this topic has been under concern lately. More unfortunate stories are coming from entrepreneurs that are trying to fund their idea. Even creating a bank account has become a long and painful process. Why banks are no longer supporting new businesses?
Less profit
At an early stage, small businesses usually do not have enough balance required by banks. This is why they prefer to work with larger, established companies — bigger funding makes more financial sense to the lender.
No credit history
Small businesses usually lack the necessary amount of credit history, which complicates the process of receiving support from the bank or eliminates it. To process the application, banks have to analyze a company’s creditworthiness. Without it, banks do not want to put themselves under risk of unsuccessful lending.
Regulation challenges
Increased regulations force traditional banks to be more careful with their investments and risks that those might bring. This led to banks reevaluate their standards and constrict their selection process. Thus, small businesses often struggle to get support from traditional banks as they are more risky to work with.
Despite these issues, we are lucky to live in the world of FinTech, where we see a lot of new solutions coming forward to support small and medium sized businesses. FinTechs are willing to fill this gap and support entrepreneurs starting from account opening up to advising. We now see companies like Crassula creating solutions for SMBs that are aimed to support entrepreneurs through digital banking. This will not only make the process of opening a bank account and managing business operations more convenient, but also by digitizing it, the process will no longer take months to get through. Crassula Banking is coming in early 2019 and will provide small and medium sized businesses with fast onboarding, ability to manage operations from any location, with user-friendly interfaces.
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