Covid Reshaped the Future of Small-Business Banking. What That Means for Your Company

While businesses are still struggling to stay afloat amid supply chain issues, hiring struggles, and one natural disaster after another, we’re also witnessing a boom of brand-new firms. A record-breaking 5.4 million businesses were registered in the past year, which means the clock is ticking as entrepreneurs graduate from the nascent “once upon a time” idea stage. What will it take to ensure these small-business stories end with a “happily ever after”?

According to Ben Walter, CEO of Chase Business Banking, owners are at a crossroads.

“There are a number of industries that did well through the pandemic and are doing better than they ever have,” Walter says. “I spoke to Joe Cruz Jr. of YaVe Tequila, for example, who had record sales in 2021, and we’re seeing a record number of new businesses launching by the day. But then you have industries such as gyms and food services that are still trying to recover.”

This “bifurcated world,” he explains, creates a disparity in who succeeds and who fails. Walter stresses that the businesses that succeed will have an even balance of investment in their digital backbone while emphasizing human connection. He went on to say that getting this balance right requires access to both knowledge and capital — and the numbers back him up.

A recent Chase survey found that fewer than half of business owners had a mentor, and 71 percent are interested in finding one to improve their business. In addition, separate data from 600,000 entrepreneurs on Hello Alice found that capital access remains a top issue, with 89 percent of owners saying that tight cash flow limits their growth potential and ability to manage their day-to-day operations.

These are persistent and existential problems for owners, and financial leaders have an incentive to develop their offerings to meet the moment and uplift their biggest customers. As a result, banks and other financial institutions are evolving into much more than a place for owners to stash their cash with an increased focus on technology and customer service.

Here are three examples that show what the future of small-business banking holds for entrepreneurs everywhere searching for their fairytale ending.

Banks and fintech companies alike must do a better job educating consumers on both the existence and benefits of business credit. One report found that 45 percent of owners didn’t know they had a business credit score; Hello Alice’s most recent data found that even among those who already utilize business credit, 62 percent were unsure how to check their current score.

This knowledge gap presents a massive opportunity for both card issuers and the business owners they serve. According to Walter, industry leaders should advocate a “more is more” approach to services around credit. At the end of the day, he explains that credit is credit — personal or otherwise — and improving access to business credit adds more of an important tool to owners’ financial arsenal. “It is important for small businesses to remember that personal credit and business credit are intermixed,” he says. “Businesses need to think carefully about how they use different parts of the capital stack to run their business.”

I know first-hand how access to credit can be a lifeline for a small business. It certainly was for us. Credit provides the flexibility to float payroll, cover expenses, and respond to emergencies while you’re waiting for that next influx of cash. An ideal world puts this critical tool in the hands of anyone who wants it. 

Data has long shown us the critical downside of the “digital divide” holding back many entrepreneurs. Some might wonder how this could still be the case in an age when seemingly everything happens online. However, there’s an obvious answer: Digital tools are still not readily available and accessible.

The same Chase survey found that 82 percent of owners want an easy online platform to handle their needs; if they have any questions, 81 percent said they prioritize products and services with easy-to-contact live support. Busy entrepreneurs simply don’t have time to beat the learning curve on digital solutions, an understandable if frustrating roadblock for those who know the growth potential they can unlock.

As the founder of a fintech company, I see this as a huge opportunity to build tools that meet owners where they are. Main Street is hungry for solutions that automate processes and make work life easier. If Chase is any indication, the big banks are also moving in that direction with a push for digital solutions, plus the one-on-one support owners will need to take advantage.

“The way we prepare for two years from now is digitization across the board,” Walter says.  “We’re increasingly investing in digital advice. The perfect answer is a measured combination of human and digital. Mentorship, coaching, and education are critical to helping people get credit ready.”

The Chase survey provides a roadmap for that combination: expense tracking, personalized customer insights, business intelligence services, and access to financial advisers and mentors. Through a new mentorship program for minority entrepreneurs, Chase has hired 40 senior business consultants in 21 U.S. cities to provide free one-on-one coaching, technical assistance, and advisory services for Black, Hispanic, and Latinx entrepreneurs. To date, more than 1,000 business owners have taken advantage of this benefit, with thousands more to come.

Meeting customers with these wraparound services that are both convenient and useful is the secret ingredient that financial institutions must adopt if they hope to ignite small-business growth while building brand affinity.

Terms like “macroeconomic uncertainty” do little to capture how unsettled the landscape is for small-business owners. Between ongoing supply chain issues and historic inflation, the uphill battle of getting access to capital to start a business has become more like a horror story. However, the overall cost of starting a business has gone down thanks to the digitization of business services.

“We are in uncharted territories — since the ’70s, this has not happened,” Walter says of the current economy. “We have to be ready for any outcome.”

For their part, entrepreneurs are digging in to meet the potential economic headwinds. Chase data found that 73 percent of small-business owners feel optimistic about their long-term future, and nearly half of owners feel more positive about their business since the start of 2022. In addition, they overwhelmingly plan to seek funding to use for hiring, training, and increased pay. This all adds up to better-paying jobs and a healthy small-business economy — if they can get the necessary capital.