Bredin Report: Challenges and Opportunities in Online Lending to SMBs

Jim Granat, Senior Vice President and Co-Head of OnDeckOn a recent Bredin Fastcast, we talked with Jim Granat, Senior Vice President and Co-Head of OnDeck, about trends in SMB online lending.

OnDeck is part of the Enova portfolio of brands, which has helped more than seven million customers access more than $40 billion in loans and financing. Granat has worked in the lending space for 15 years, specializing in small business lending for a decade.

“Both of my grandfathers were small business owners,” he notes. “I’m passionate about helping small businesses achieve their goals. It’s part of the American dream.”

BREDIN: What trends are you seeing around small business lending in the United States?

GRANAT: Online lending is more prevalent than ever for small businesses. We now have a generation of business owners who have grown up with the internet and smart phones, and they appreciate the ease of working with online financial services companies online. It feels normal for them to apply for a loan. In NFIB’s May Small Business Optimism Index, only 22% of small business owners said their credit needs were currently being met. That leaves a gap that online lenders can step up to fill. I think we’ll see more tech companies and more traditional financial services companies get into fintech. It’s a large space and players of all types will find their niche.

BREDIN: What impact is the current state of the economy having on small businesses?

GRANAT: In addition to inflation, there are a lot of variables in the mix, such as supply chain issues and political discourse. But there are also positive signs. Many businesses that survived and even thrived during the COVID-19 pandemic are very strong. They faced hardships and made good decisions. Now, they’re looking to use their cash in the right way to grow. There is an increase in the need for credit, particularly for businesses that have had to lean on their cash reserves.

BREDIN: How can vendors support small businesses that might be struggling, either from inflation or continuing fallout from the pandemic?

GRANAT: It’s important to start by having a great product and offering a quality customer experience. Vendors should start by thinking about how they can solve problems for customers. Stay true to providing good service and making the right decisions for your brand, and it will translate into a win-win for everyone.

BREDIN: How important is the customer experience in online lending?

GRANAT: We want to make accessing our products and services easier for everyone involved. By necessity, traditional banks often move more slowly than online lenders. Understandably, traditional financial institutions aren’t necessarily interested in doing smaller or riskier loans, because of their return on investment and underwriting requirements. As an online lender, we target a slightly different market. By using machine learning to inform our underwriting, we can make the process of applying for a loan online faster and easier. This translates into a better customer experience.

BREDIN: A record number of new small businesses have formed in the last two years. What does that mean for the SMB space in general and the financial services industry in particular?

GRANAT: A QuickBooks study predicts that 17 million people want to start a business in 2022. The new gig economy isn’t surprising — so many people were at home and unemployed during the pandemic, and many decided to take matters into their own hands, starting their own businesses. Those new businesses in the start-up phase have working capital needs and that makes them potential financial services customers. There will be ups and downs, but that tailwind makes us feel bullish about the future.

BREDIN: Start-ups can be a difficult segment to market to — how is OnDeck engaging these prospects?

GRANAT: There’s no silver bullet. We try to be diverse in the ways we approach the market. We’re forming strategic partnerships, working with independent sales organizations, and using a variety of tactics and channels, including direct mail, search engine optimization and TV commercials to reach these customers.

Need help understanding and/or engaging SMBs? Bredin can keep you up to date on evolving SMB needs and challenges through agile, actionable market research. We can also help you develop high-value content and social posts to boost SMB awareness, brand perception, leads, conversion and revenue.

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About Bredin

Bredin was founded in 1991 by America's foremost small business expert, author and syndicated columnist Alice Bredin. From its beginning, Bredin was designed to be a breed apart: 50% research consultancy, 50% creative agency, 100% focused on SMB. Based in Somerville, Mass., Bredin helps Fortune 500 companies understand, reach and retain SMB customers through timely, targeted research and award-winning marketing programs.