Contact Information: Lauren Shankman Trevelino/Keller Communication Group 404-214-0722 x110 lshankman@trevelinokeller.com
Small Business Funding Alternatives Sought When the Bank Says "No"
Survey Results Show Banks Missing Opportunity to Satisfy and Retain Valuable Customers
| Source: AdvanceMe, Inc.
ATLANTA, GA--(Marketwire - July 21, 2008) - The results of a recent survey of small
business owners reveals a desire for banks to offer other options when a
loan application is denied. The Spring/Summer 2008 edition of the Capital
Access Network (CAN) Small Business Barometer uncovered that 87 percent of
rejected small business loan applicants were not offered any alternative by
their bank after they were denied a traditional lending product. However,
69 percent said they would consider an alternative offered by their bank,
highlighting an opportunity for banks to satisfy customer need by providing
other funding options and ideas.
An overwhelming 87 percent of small businesses surveyed indicated that it
is important to have access to a readily available and predictable source
of capital, a reflection of today's credit conditions. These results
indicate that banks may have a compelling marketing opportunity to provide
additional value, secure customer loyalty and responsibly meet demands for
working capital even as credit conditions tighten. The survey was conducted
online; respondents consisted of 276 small business operators who accept
credit cards as a form of payment in their business.
What Happens When the Bank Says No?
An April 2008 survey released by the Federal Reserve found that
approximately half of U.S. banks are tightening their small business loan
standards, compared with approximately 30 percent that reported doing so
earlier this year. Loan decline rates of 70 percent or more are common.
What happens to the small businesses that are turned down for traditional
financing, and where can they turn next?
Is Your Bank Still Your Best Source?
Even amidst the documented "credit crunch," 76 percent of respondents
believe that banks are still one of the most trusted sources of capital,
despite perceptions that banks are struggling financially. Yet 42 percent
also place strong importance on having an alternative or back-up source of
capital readily available. A total of 69 percent of the survey respondents
said "yes" when asked if they would consider an alternative offered by
their bank if the bank was unable to provide a loan or offer the full
amount of required capital directly.
Life After "Decline": Benefits to Offering Alternative Working Capital
Solutions
A new value enhancing strategy for banks to consider is alignment with an
alternative provider of working capital. Through a well-crafted referral
program, banks can create revenue from what would otherwise be a
dissatisfied customer. Working with alternative capital providers can be
a benefit for both the financial institution and the small business
customer in what could be dubbed the "antidote" to the credit crisis.
"Working capital referral programs have the potential to support banks and
their loan officers in acquiring, retaining and even expanding small
business relationships by providing working capital to businesses that fall
outside the bank's regular lending parameters, all without cannibalizing
existing credit revenue," notes Nick Miller, president of Clarity
Advantage, a consulting group specializing in sales acceleration
engineering for the financial services industry.
Companies who provide alternatives to small business loans and other forms
of business financing are experiencing increased interest in their
products. A Merchant Cash Advance is an increasingly popular solution for
banks that want to retain the profitable small business checking accounts
of small business customers rejected for loans or other bank financing.
The product can be delivered through white labeled, co-marketed or referral
programs at the time the loan is declined. Training of bank personnel is
minimized, because the offer is made through a centralized communication
mechanism.
Merchant Cash Advance providers are able to approve requests that banks
deny because they focus less on consumer-oriented measures of viability
like credit scores and place greater emphasis on the business's track
record of success when making funding decisions. Plus, personal collateral
is not required and money can be delivered in as few as 3 days.
"Banks are constantly seeking ways to provide value and increase revenue
without negatively impacting customer satisfaction. Partnering with a
credible, responsible provider of alternative working capital solutions
achieves both objectives while highlighting the bank's focus on innovation.
Early adopters of these kinds of programs will have a significant first
mover advantage," said Glenn Goldman, Chief Executive Officer of Capital
Access Network, Inc., the parent company of AdvanceMe, Inc., a provider of
Merchant Cash Advances based in Kennesaw, Georgia.
Capital Access Network Small Business Barometer
The CAN Small Business Barometer is commissioned by Capital Access Network,
Inc. with the purpose of capturing and reporting data that will continue to
support the growth and viability of small businesses across America.
About Capital Access Network
Capital Access Network, Inc. (CAN) serves the small business market through
its wholly owned subsidiaries. CAN is engaged in the business of
generating and maintaining high yielding short-term assets by leveraging
leading edge data, systems and technology that is married to a unique,
highly effective collection methodology. Founded in 1998, CAN and its
subsidiaries currently employ more than 300 people in five main locations
in New York, Georgia, Massachusetts, Minnesota and Costa Rica.