A new wave of fintechs and neobanks has been sweeping the world of SME Lending off its feet by embracing digital technology, data, and advanced analytics like machine learning and AI. And there’s never been a better time for it. The landscape has changed dramatically for SMEs, not necessarily for the better. The potential of a global recession has consistently lowered margins and hurt SME scaling and expansion efforts. According to a recent report by the World Economic Forum, nearly two-thirds of small to mid-sized businesses (SMBs) said survival and expansion are their primary challenge.

Unlike consumer payments, the B2B variety remain mired in legacy systems and manual practices. And unlike larger, established companies who have long and secure relations with their financial institutions, SMEs have a larger need of help in accessing working capital, which remains their critical pain point.

The result? As access to working capital from traditional lenders dries up, SMEs are increasingly looking to digital-first and alternative channels. A surprising 75% of SMEs report being more likely to use a digital-only bank as their primary provider of working capital. We revisit our list of SME lending innovators, as they go from trend setters to “the new digital normal” in SME financing.

1. OakNorth – UK-based fintech OakNorth delivers instant credit analysis and real-time portfolio insights focused on transforming commercial lending. The co-founders of OakNorth were rejected for the credit needed to grow their business numerous times, prompting them to create their Credit Intelligence platform. Their goal was to build a robust, sustainable bank but also to create software that would enable other banks to lend to SMEs that were previously underserved.
2. NeoGrowth – Founded in 2011, India-based NeoGrowth Credit is a tech-enabled business that offers unsecured loans to small retailers in India. Combining traditional and alternate data for more accurate credit scoring, NeoGrowth also offers dynamic repayment terms and automated collections processes to help identify the most creditworthy customers. Calling themselves pioneers in SME lending based on the underwriting of digital payments data, their mission is to help small business owners drive growth that matches their ambitions. Also read: What is credit underwriting?
3. Kabbage – Selected for the 2019 Forbes FinTech 50 startups list, Kabbage (now owned by American Express) provides SMBs with credit by evaluating business-focused alternative data like accounting info, online sales and shipping. With this more nuanced view of data to better understand performance, Kabbage is able to offer flexible credit options in real time.
4. Banco Pichincha – In 2016, Banco Pichincha received a credit line of $55 million from the International Finance Corporation (IFC) to finance loans to women-owned SMEs in an effort to fuel the growth of female Ecuadorian entrepreneurs. Ecuador’s largest bank, they doubled down on their mission in 2019 when they signed an alliance with the Overseas Private Investment Corporation (OPIC) and Wells Fargo for a combined loan of $108 million to support loans to MSMEs in the region that are owned, led by or support women.
5. Allica Bank – Claiming that SMEs have often been left behind by the ‘big banks,’ Allica Bank combines modern technology with local relationships to ensure SMEs have the tools and the funding they need to operate. Based in the UK, Allica Bank offers SMEs asset financing, with up to £1 million worth of flexible financing options.
6. Judo Bank – Australia’s only challenger bank built specifically for lending to SMEs, this innovative organization seeks to bring back the lost art of relationships in business banking. Created by experienced business banking professionals, they brand themselves as a ‘genuine alternative’ for SMEs who want quick access to not only funds, but the superior customer experience they deserve.
7. First Circle – Based in the Philippines, First Circle’s mission is to enable SMEs to achieve their full potential through fast and flexible financial partnership. Their customers often have no credit data or fixed collateral and as a result are excluded from the traditional banking sector (and therefore often forced to work with predatory lenders). First Circle allows these SMEs to secure funding in as little as a day through an automated, digitized application process.
8. Lulalend – Sixty percent of South African businesses find it difficult to access the capital necessary to grow their business, due to long wait times, painful paperwork requirements and the necessity of high collateral. Lulalend uses AI to score creditworthiness instantly, ensuring small business owners are able to receive funding within 24 hours of applying. To date, they’ve processed over 70,000 applications and secured funding for thousands of small businesses across South Africa.
9. Siembro – Argentinian organization Siembro uses AI to power their in-house loan algorithm, providing them the ability to offer instant loan approvals for small businesses in the area of agricultural and machinery. With over 1.5 million small and medium farm businesses in the country who have limited access to credit (and limited cash flows), Siembro focuses on ensuring corn, wheat and soy farmers obtain the funding they need to survive.
10. Iwoca – A start-up that began when its founders noticed that small businesses were getting shut out of access to much-needed credit, iwoca is now one of the fastest-growing business lenders in Europe. Working towards a goal of funding one million small businesses, iwoca wants to ensure that SMEs have more time to run and grow their business instead of being forced to fill out endless paperwork and wait for approvals. Recently, their B2B financing solution iwocaPay integrated with Quickbooks to help small businesses with their cash flow, increasing businesses’ customer base and revenue.

By embracing the use of digital technology, data, and advanced analytics like machine learning and AI, these companies have been able to simplify, and in many cases completely transform application processes. They are able to automate credit decisioning to provide accurate, real-time approvals, allowing SMEs to gain access to funds quicker than ever before. By automating data collection, risk decisioning and pricing, lenders can automate approvals and ensure funding is in hand within a matter of only days – or even hours!

The capabilities these lenders are offering are not just a critical lifeline. Their products tend to be more flexible and more personalized to each SMEs unique needs, allowing them to go from mere survival, to full-blown adaptation to a changing, uncertain environment. That is the unique power of AI-fueled, data-led tech innovation.

Also, read: What is Banking as a Service (BaaS)?