Though the 2008 global financial crisis didn’t drive Australia into recession, the evolution of banking practices since then have affected how banks interact with their small business clients. Most notably, large financial institutions have competed with each other to integrate technology that increasingly automates and streamlines their services. In many cases, this has meant expanding the capabilities of online banking to better serve small business customers. While many of these changes have had positive effects for small business, they’ve also left some notable gaps.

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Though routine banking with your regular bank might be faster and easier than ever, it’s getting increasingly difficult for small business owners to develop, and reap the benefits of, a more personal relationship with their financial institution. Large institutions aren’t equipped to take a very involved role in managing the day-to-day financing needs of relatively small clients. As a result, entrepreneurs are increasingly turning to other options to get the help they need to deal with their cash flow issues.

Primary SME banking is going virtual

In terms of general banking tasks, the increased application of technological solutions has been had some significant benefit for small business owners. Because business owners rarely need to actually visit the bank and produce physical paperwork to do their banking, they can perform everyday transactions far faster and more easily than before. Further, a lot of banks offer a variety of innovative cash flow management tools designed to help businesses create and deliver e-invoices, track transactions in real time, and manage budgets.

This highly automated approach offers unprecedented utility for customers, but it also contains a major service gap. Small businesses constantly deal with small cash flow interruptions, for which they need relatively small-scale short term financing solutions. Generally that means applying for financing and going through a human-powered approval process. Constantly processing and approving small loans, and then checking in on and advising clients to manage the associated risk, simply isn’t feasible for a lot of large financial institutions. That kind of service is generally only available to relatively large businesses who are working with much larger amounts that can justify the cost to the institution.

Similarly, the small business solutions offered by these institutions also need to be designed to justify the investment. For example, traditional invoice financing isn’t done per individual invoice, but rather by signing up for a year-long commitment where all invoices will be financed. This has empowered smaller finance institutions like Fifo Capital, who often work with larger partners to provide small businesses with more customisable and personalised solutions.

Providing the services SMEs need

Smaller institutions can offer these smaller scale short term financing solutions because they operate on an entirely different business model. By working much more closely with businesses, Fifo Capital and similar institutions can develop in-depth relationships and inside knowledge of their clients. This allows them to assess and manage the risk of financing clients in a much more holistic way, while also helping to ensure the client’s (and the investment’s) ultimate success.

Dedicated representatives and high-touch service

Every small business client that Fifo Capital works with is in touch with a dedicated financial representative. The business and representative always work together, so that they can build an informed in-depth business relationship. The representative will analyse the business, and develop a thorough understanding of how it works and what its needs are. The client benefits from working with an informed financial expert who can advise them on exactly what the best financing options are for them, and the financial institution benefits by being able to profitably serve clients whose needs can’t be efficiently met by their primary institution.

Fast, small scale solutions

Because of their in-depth client relationships, these small financial institutions can rapidly approve and fund new financing applications with minimal additional labour invested, often in less than a business day. This also allows them to work with far smaller loan amounts than a primary banking institution can. For example, Fifo Capital issues business loans as small as $5,000 dollars. In the same vein, they can offer invoice financing for single invoices, transforming the utility of the service into a way to get a quick advance on an outstanding invoice rather than the more traditional motivation of simply hedging against general late payment issues.

Big banking institutions will continue to evolve and develop new and better tools for small business owners to manage their banking needs. As they do so, smaller financial institutions are similarly adapting to provide the support, the relationships, and the funds that SMEs need to succeed and grow.