As U.S. small businesses rebound from challenging economic times, they should look to community and regional bank partners for innovative financial products. The Payroll Protection Program (PPP) relief lending was, by and large, provided to businesses by community banks. These organizations can now expand their relationships with small businesses by offering automation and payment solutions to help these firms grow.

Why the small business market?

Financial institutions face intense competitive pressure for their large commercial customers – along with challenges to acquire many consumer relationships.

One of the last strongholds for regional and community banks is the small business customer. This sentiment is reinforced by recent research from Business Intelligence indicating that Small- and Medium-Sized Businesses (SMBs) are vital creators of wealth, income, and jobs in the global economy.

These firms make up 99.9% of all private sector businesses in both the U.S. and the U.K., and they employ 60% and 48% of all workers in those countries, respectively. The income and assets of these businesses make them an irreplaceable customer base for financial institutions

Small businesses are ready for new technology and expansion

According to FIS’ 2021 Small Business PACE survey, nearly all small businesses reported finding at least one “silver lining” during the pandemic. Most businesses adapted to the Covid-19 crisis by changing the way they do business in some way, leaving behind positive changes that will outlive the pandemic.

Changes made by small businesses included:

Technology adoption and increased efficiency are the most frequently experienced “positives” from small business response to Covid-19

Nearly all businesses say they expect to adopt or improve technologies in the next 12 months

About six in 10 businesses responded by opening new lines of business or changing their products/services

Three-quarters of businesses say they benefited in some way from customers changing their buying behaviors during the Covid-19 pandemic

Bankers need to think differently

These PACE findings indicate the openness small businesses have to new ways of conducting business. Banking remains all about relationships, with lending just one side of the equation.

Small business owners have very real financial services needs beyond borrowing – these concerns extend into areas such as cash flow, operating more efficiently, and understanding their financial positions.

Small business solutions that accelerate accounts receivable processing, manage the outbound payments, and save owners time stand a very good chance of winning in this competitive market.

Address needs in accounting and payments

In a recent Cornerstone survey of small businesses, many small business owners, and executives – particularly those from larger organizations – expressed an interest in getting accounting and payments services from a bank. Roughly four in 10 small businesses with revenues greater than $5 million said they would “definitely” consider a bank for accounting, invoicing, bill pay, and payment acceptance services. This creates a tremendous opportunity for community and regional bankers.

Offer products enhance relationships

The importance of integrated accounting software for small businesses should not be underestimated. According to recent research from MetLife and the U.S. Chamber of Commerce, small business owners likely work far longer hours than the average American and sleep far less than the recommended eight hours per night. During those long working hours, they spend 5.6 hours working with clients or customers, another 3.7 managing staff, and about four hours on administrative tasks.

Better use of tech can help owners manage time, increase efficiencies throughout their business, and feel better about their overall business health.

Accounting products offered through banks expand the share of wallet for small business customers due to increasing their efficiency. FIS notes that the growth in number of products per small business over one year is 61% for with automated accounting and invoicing solutions.

The time to act is now

Financial institutions should partner with an innovative fintech provider that can help them offer an integrated small business accounting, invoicing, and payment solution. Such an offering should let business customers:

• Send invoices
• Get paid online
• Pay bills
• Automate accounting

Invoicing and receivables solutions as embedded features within a bank’s digital business platform will resonate with small business owners.

Proof points from one provider of integrated financial small business solutions notes that bank partners report small businesses with their product get paid twice as fast, in 16 days vs. 33 days. This can make or break many smaller operations. And it can grow the bank’s relationships for deposit growth and lending opportunities.

The small business market provides an attractive opportunity for regional and community banks. Offering these customers robust financial solutions is key to locking in relationships and deriving the long-term benefits of such relationships. HORIZON partners with providers of these types of solutions, helping financial institution partners gain deposits and grow lending relationships.