Small business lending, which has seen several lean years, seems to have finally turned a corner. Investment giant Wells Fargo Bank has publicized a commitment to lend $100 billion to small businesses in the United States by 2018.
Since the start of the recession, capital has been difficult to secure for small businesses, stifling expansion and innovation along America’s Main Street. Small businesses are integral to economic growth, as small businesses have added 8 million new jobs in the last 20 years, while big businesses have eliminated 4 million in the same time span.
“Right now one of the most important things we can do is grow the small business segment, not just for our bank but from the standpoint of the economy,” Jim Malcolm, Wells Fargo’s northeast small business strategy director, told Forbes. “This is where we are seeing a lot of growth and where we want to encourage growth and success among smaller businesses that are getting started.”
Wells Fargo is not the only bank to turn their eye towards growing America’s small businesses. BBVA Compass recently entered a partnership with online lender OnDeck to help small businesses and start ups that do not meet their normal loan capitol gain access to capital.
This marks a significant shift from the practices of previous years, when the central banks expressed little interest in serving the small business community. This attitude had small business looking to smaller, alternative lenders such as Merchant Cash and Capital, who have funded over $680 million through more than 30,000 transactions in the past nine years. These alternative lenders have come to learn the needs of small businesses, and are able to offer a more streamlined application process and faster decisions than the larger banks.
As more funding is funneled into small businesses, lenders can be better prepared for an increase in loan applications by investing in application processing software, which serves to streamline the origination process and secure the data needed to process applications in a manner that is consistent and cost-effective.
