Small-business owners want online loan applications to be clear and easy to understand.
A 2018 Federal Reserve survey revealed that about 59% of small banks and 57% of large banks consider borrower relationships to be their most important competitive advantage. However, this roadblock is steering many small-business (SMB) borrowers away from traditional banks and towards alternative lenders, putting invaluable bank-borrower relationships at risk: ‘bank’ speak.
What’s ‘bank’ speak? It’s the technical jargon banks use in the everyday of running a financial institution – particularly when collecting financial information from SMB loan applicants. It’s a language most bankers, accountants and financiers are fluent in, but not so for many small business owners.
In fact, a series of focus groups with small-business owners conducted by the Federal Reserve discovered found that while SMB owners want to work with traditional banks for their lower-priced loans, SMB owners often became confused during the application process – especially when comparing loan products. Further, when SMB participants were asked, “How much will these various options cost me?”, the common answer was, “Lost in the technical jargon.”
What’s the impact of ‘bank’ speak to SMB lending? Simply, more SMB borrowers are applying for loans with alternative lenders – about 32% in 2018 compared to 19% in 2016 per this Small Business Credit Survey.
But, as Mirador EVP and GM Trevor Dryer notes, banks can stem the tide of SMB owners seeking out alternative lenders for a simpler, jargon-free application experience. In his latest Forbes article, Dryer shares three simple things banks should do to make their small business loan applications friendlier and less confusing for SMB owners, creating a better experience and preserving a bank’s most important competitive advantage: its customers. Read the article now.
A Forbes Finance Council member, Trevor Dryer is an advocate for small business lending and a fintech proponent. He regularly contributes think pieces about small business lending, trending topics in the banking industry and improving access to capital. Follow his contributor page.