Time to take the blinders off small business services

Small business relief programs have held bankers’ undivided attention lately. What was once considered a largely underserved segment in the financial industry is now at center stage.

Businesses are relying on their banks now more than ever before to provide the relevant financial tools that they need to survive. But the responsibility does not end with lending. Bankers must recognize that while loans can be helpful, providing small businesses with a simple way to get paid and manage finances is arguably more important to their longevity.

Traditionally, lending has been the extent of specialty small business banking services. Businesses then had to balance between retail and commercial services for their other needs. Recent events have proven the industry needs better education on small business banking services, starting with payments.

Banks have enabled small businesses to move money out of the institution with services like bill pay, but not into it. This created opportunities for non-bank providers like Square and PayPal to drive inbound payments, and subsequently offer additional banking services that disintermediate the relationship from the institution.

Lack of cash flow has been an issue for small businesses that long predates the coronavirus pandemic. And with concerns about cash flow growing, small businesses must make operational changes quickly. These businesses are used to having customers come into their stores, transacting and interacting on a personal level. Social distancing makes these connections, and subsequently the selling of goods and services, much more difficult.

As a result, small businesses are leaning on their financial institutions to help them transition to e-commerce. Then businesses can rally local support and keep money within their communities. Banks can help small businesses get paid at a distance by accepting multiple forms of electronic payments and sending digital invoices. Small businesses want creative and cost-effective ways to collect these payments (e.g., shareable social media links or email) to satisfy the preferences and lifestyles of their customers.

And this is not a short-term need. As more small businesses transition to digital and even social selling like Facebook Marketplace or YouTube, they’re developing new avenues for sales that will become part of their business beyond the pandemic.

Financial institutions like First Bank, serving the Carolinas, and San Antonio, Texas-based Broadway Bank are offering these types of services to their small business customers and have already seen success from a variety of industries. For example, a vintage furniture store has connected with its customers digitally and offers an easy way for them to pay for the products they love. And a local tutoring company lets parents pay online for their video services. Banks are helping businesses operate differently in order to continue generating income in a rapidly evolving world.

The pandemic has shown financial institutions are lagging in serving small businesses. Lending services are beneficial, but institutions will need to offer payment, accounting and invoicing capabilities to catch up to non-bank competitors. Luckily, financial institutions already have the trust and relationships of their customers. A company like Square doesn’t know a small business customer personally, like their local financial institution does. Chances are they won’t be keeping tabs on the furniture store or tutoring company.

Now is the time for banks to offer small businesses the financial tools they desperately need to keep their doors open and their futures bright. In honor of National Small Business Month, take time to define what small business banking services mean and evaluate current offerings, then see where improvements can be made. Together, we can support small businesses and help our economy regain its strength.

Derik Sutton is the vice president of product & experience at Autobooks, a small business payment and accounting platform integrated within a financial institution’s digital banking experience.

Want more BAI Banking Strategies? Sign up for our free newsletter.