Is your credit union losing business loans to alternative lenders?
Ease and speed of access to commercial loans trump pricing for some business owners, which tips the scale for these typically younger borrowers toward online peer-to-peer lenders, according to a survey by Mercator Advisory Group (mercatoradvisorygroup.com), Boston.
Key conclusions from Mercator’s 2017 U.S. Small Business Payments and Banking Survey, which polled 1,600 business owners with between $500,000 and $5 million in annual sales, find that:
- More than one in four (27 percent) respondents had a current loan with an online alternative lender, such as Kabbage, Lending Club, OnDeck Capital and Prosper.
- Business owners ages 18 to 34 were more than twice as likely as older businesspeople to use alternative lenders, citing an easier approval process and quicker access to loan funds as their primary reasons.
- Only 7 percent of respondents reported using alternative lenders because they offered a lower interest rate.
Four in five business owners relied on a line of credit to help manage business expenses, the survey found, and millennials were more likely to use business and personal credit cards to manage cash flow than to apply for lines of credit from a bank or credit union offering business services. For credit unions looking to cater to millennial business owners, the Mercator report concludes, “ease of loan application and faster funding are of critical importance.”cues icon