Barclays has launched a one-hour SME loan approval facility for credit up to £25,000 via its mobile app. This is the second major improvement to Barclays’ SME proposition in less than a year.
The one-hour loan approval is a significant improvement, but it is also necessary to reach those time-poor small business owners. According to Barclays’ own survey of 794 SMEs, many of those who have applied for funding expected the approval process to take up to five weeks.
The service is only available to customers who have been with the bank for over six months and have been using Barclays’ mobile banking service. Barclays achieves the fast turnaround by using pre-approval, where all the necessary cash flow and financial metric calculations as well as ID checks are conducted beforehand.
The one minor drawback to the service is the relatively low amount of credit that small businesses can access. According to the British Bankers’ Association (BBA), the average loan value approved for small businesses in the third quarter of 2016 was £86,700, considerably more than the £25,000 available with Barclays. Despite this, improved access to credit will no doubt be welcomed by SMEs across the UK.
Data from the BBA shows that loan approval rates for small businesses have remained broadly within the range of 76–83%, rising to 85–93% for medium-sized businesses over the last four years. However, the high approval rate belies the fact that only a small proportion of SMEs are actually applying for credit. In the third quarter of 2016, only 31,596 applications were made by the UK’s 5.2 million SMEs. Over the last four years loan applications have followed a downward trend while deposits have steadily increased, suggesting that SMEs are not growing as fast as they otherwise could be.
However, Barclays’ SME proposition is going from strength to strength. In April 2016 Barclays launched its SmartBusiness app, which provides SMEs with granular data analytics on transactions and average customer spend, as well as performance comparisons with similar local businesses.
As an increasing number of individuals seek employment as sole traders or small business owners, banks that adapt their SME propositions to serve time-poor, tech-savvy customers will have the opportunity to build long-lasting relationships as their customers’ businesses grow. Those banks that are able to integrate invoice trading or similar features that can keep an SME’s cash flow going will be the ones that turn long-lasting relationships into highly profitable ones.
For further information please contact Sean.Harrison@globaldata.com.