The days when small business lending was seen as a dry patch of land by the innovative lenders are long gone. Almost suddenly this lending space has become the hotbed for alternative lenders with few of them like On Deck Capital Inc (NYSE:ONDK) even going public.
The scenario is overturned to such an extent that small business entrepreneurs now struggle to choose among the plethora of alternative lenders. This explains the fierce competition that exists between lenders and the success of positioning as a leader in the crowded space majorly depends on the lender’s model.
Thus, alternative lenders have following ways to become appealing to small business owners.
- Diversified product portfolio – To be able to succeed in the small lending space, lenders should focus on keeping their offerings diversified. It implies that the lender should not only be in the position to offer capital to small businesses but also lend them advise to bolster business relationships.
- Customer retention costs – Successful alternative lenders should be able to trim down their average cost for customer acquisition and retention. This means that lenders should not only spend on direct sales but should float relevant content or interactive platforms to help business continuity in an indirect way. By engaging with customers through modes other than direct sales can help a lender to cut their customer acquisition costs to $100 per year from $2,500.
- Remain affordable – For a small business owner, borrowing a capital boils down to its affordability. Thus, no matter how engaging or customised a lending service appears, the final borrowing call depends on the cost of capital. The winner is ultimately the one who lends at the lowest rate. Thus, it is the responsibility of the lending platform to make the best use of the technology and innovation before someone else grabs it from them.