Once an opportunity to finance an SMB has been fielded, a costly endeavor, such a lending opportunity also requires time-consuming and costly due diligence. Stymied by such scale challenges, the banking industry has been ambivalent about lending to SMBs—so ambivalent, in fact, that banks created a market-entry opportunity for alternative lenders.
Aite Group finds that alternative lenders’ share of the SMB market by application is 16%, but alternative lenders’ share of the closed loan market is only 13%. Despite boasting of speed and convenience, these lenders’ share remains small, and many of their prospects appear to be going elsewhere after the application process.
According to Aite Group, a potential reason for why alternative lenders lose prospects is because 10% of credit applicants were dissatisfied with the response times for their credit applications—a factor identified by SMBs as being among the most important when deciding where to close their loans.
To turn more prospects into clients, alternative lenders should manage their customers’ expectations more carefully. Despite marketing campaigns focused heavily on rapid response times to credit applications, SMBs’ satisfaction levels with alternative lenders’ credit application turnaround times reveal a lack of compelling competitive advantage.
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