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Small Businesses Want Online Credit Experiences

September 15, 2021

One likely side effect of the pandemic is the small business credit market being nudged online. Small businesses are increasingly using online channels for a variety of credit activities, beginning with the shopping process and obtaining information about credit services. For small businesses, the ability to monitor credit activity online is an important factor when selecting a credit provider. In addition, more small businesses are applying for credit online. These are among the findings from Small Business Credit and Lending, a recent study conducted by Phoenix Synergistics (a unit of Phoenix Marketing International). A highlight of the study was a national, online survey with 1,000 owners and executives of small businesses with annual sales of $50,000 to $5 million.

When small businesses were asked about their most preferred method for obtaining information about credit services, online via PC was most likely to be preferred when shopping for both loans/lines of credit and credit cards.

Small businesses indicated that the ability to view their credit activity online is an extremely important factor when selecting a credit product. This feature tops the list of important factors and is followed by a fixed rate and the ability to make credit payments and obtain advances online. Two of the top-three product-selection factors involve online access.

When it comes to applying for credit, online via PC was again the most preferred method. Small businesses are most likely to cite online via PC as the most preferred channel for applying for both loans/lines of credit and credit cards. In-person at a branch is the second-most-preferred channel. A variety of channels follow these two top mentions.

When small businesses that have applied for credit were asked about their most-recent application experience, online via PC was the top channel to have been used, followed by in person at a branch. Three in ten (29%) credit applicants most-recently applied for credit online using a mobile device, which is significantly higher than the 6% who applied using a mobile device in 2017. In 2021, a large majority (80%) of those applying online (via PC or mobile device) indicated that the entire process was completed online.

Non-traditional and non-bank online lenders are a significant factor in the small business credit market. A majority (60%) of small businesses have borrowed from a non-traditional lender, such as an e-commerce company, a non-bank online lender, a logistics company, or a supplier. This represents an increase from 40% in 2017. In 2021, small businesses that have borrowed from non-bank online lenders are most likely to cite PayPal (58%) as a platform/service they have used.

Bill McCracken, president of Phoenix Synergistics, stated, “The small business credit market is clearly becoming an online market. It is essential for lenders to provide a robust and seamless online experience for small business credit customers across all types of online devices—computers, mobile phones, and tablets. This experience must be all-encompassing—from providing information about credit services to providing the ability to view credit activity online to facilitating online credit applications. The competitive threat posed by non-traditional and non-bank online lenders is strong, and traditional small business lenders cannot be caught unprepared for this new online world of small business lending.”

These are among the findings from a recent Phoenix Synergistics study, Small Business Credit and Lending, which features 1,000 online interviews with owners and executives of small businesses with annual sales of $50,000 to $5 million.

Phoenix Synergistics, a unit of Phoenix Marketing International, is the leading provider of multi-sponsor marketing research for the financial services industry. For more information, contact Bill McCracken, president, Phoenix Synergistics, email bill.mccracken@phoenixmi.com

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