Expanding their small and medium-sized business (SMB) lending allows credit unions to deepen their relationships with members and better serve their communities. Yet many institutions find themselves on the back foot when it comes to bringing SMB lending products to market, challenged by a combination of limited experience and competition from fintechs and community banks.
As many credit unions tapping into the market have found, SMB lending involves more than just larger loan amounts. They have to know their competition, understand what small business owners need in a lending relationship, and modernize their risk management practice. If you’re a credit union looking to grow your SMB offerings, check out the most common challenges below, plus our tips for overcoming them.
First, credit unions need to know what they’re up against. They have two primary competitors for the SMB market: community banks and fintechs. Community banks have deep local ties and excel in personal service. They might offer competitive rates, but their real strength lies in understanding local business needs and dynamics. Fintechs streamline financial processes through digital solutions, excelling in SMB lending by automating decision-making and simplifying applications. Their efficiency attracts small business owners who prioritize speed over lower rates.
To effectively compete with fintechs and community banks, credit unions need to make the lending process as effortless as possible. A small business owner’s time is precious. When choosing between a loan with slightly a lower rate from a credit union or one with a higher rate from a community bank or fintech, business owners may opt for the more expensive loan if the application process is easier.
The lowest rate doesn't always secure the business. If fast, smooth lending experiences are the deciding factor, credit unions will need to implement automated decisioning to slash loan approval times.
Assessing credit risk in SMB lending traditionally involves collecting extensive paper documentation, such as two years of tax returns and six months of bank statements. A business owner has to gather all these documents, and the back-office staff has to manually process and analyze them. It’s cumbersome enough to send any time-pressed business owner to a community bank or fintech offering faster and easier loan approvals.
Now, credit unions can use decisioning platforms that automate cash flow underwriting. This type of decisioning technology analyzes real-time inflows and outflows from a business’s bank account, providing a dynamic and accurate picture of a business’s financial health.
For some Amount customers, shifting from document-heavy risk assessment to automated, dynamic decisioning sped up the loan approval process from three weeks to three days. For instance, adding a beneficial owner is as simple as providing their phone number and having them complete the same application flow as primary applications. Amount’s platform automatically directs beneficial owners to undergo KYC, FCRA checks, fraud risk screening, and identity verification within an easy-to-use web app workflow.
The capstone opportunity to seize more of the SMB market is developing dedicated SMB lending products that specifically address the needs of small business owners. For example, businesses that experience seasonality or irregular cash flows need working capital loans, such as lines of credit or term loans. Access to capital remains both a concern for business owners, given high interest rates of the last few years, and a lending opportunity for credit unions. According to a 2024 Goldman Sachs survey, 77% of SMB owners are concerned with their ability to access capital.
Pairing lending products with SMB deposit accounts not only meets the financial needs of small businesses but effectively anchors the credit union as the primary financial institution for these members. Combining low-cost, sticky deposits like SMB deposits with working capital products creates a quick ROI for credit unions. A steady low-cost deposit base can enhance financial stability and allow the institution to extend more credit under favorable terms.
When rolling out their new SMB products, credit unions should first target existing members who own businesses, building off their established trust and name recognition. This go-to-market strategy helps credit unions deepen financial relationships with their member base and enhance their service offerings. In turn, securing a foundation of low-cost deposits diversifies a credit union’s portfolio and improves its risk profile.
Traditionally, credit unions have relied on separate platforms for consumer and SMB lending, resulting in disjointed experiences across user groups, including bankers, members, and back-office staff.
Amount tears down those silos with a unified platform for both consumer and small business banking, which includes lending and deposits. A platform that integrates consumer and SMB lending operations plus deposits allows credit unions to leverage shared data — for example, marketing consumer cards to business owners based on their line of SMB credit. This capability creates smooth origination experiences and facilitates more deposits.
As a unified platform, Amount enables credit unions to proactively prospect for SMB owners within their existing members. With automated eligibility decisioning and embedded share account funding, new members can join and open a lending account in under five minutes.
And thanks to Amount’s recently-released SMB Suite, secured and unsecured lending, deposits, adaptive loan applicant journeys, pre-built best practices, and curated best-in-class data sources all come together so credit unions can sharpen their SMB competitive edge.
Amount provides industry-leading technology and guidance to accelerate time-to-market by up to 70%. In fact, credit unions who partner with Amount can see a new SMB lending product up and running in less than 90 days—even with zero prior SMB expertise.
For more insights on how to win in the SMB marketplace, read our insights guide: Reimagining Small Business Lending: How to Turn Challenges into Opportunities.