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Current Economic Climate Just Right for Small Business Lending

Main Street lending isn’t just for traditional banks and credit unions anymore as some interesting third parties are trying to get into the small-business loan game. 

News broke on February 3 that Goldman Sachs is in talks with Amazon to extend loans to small and medium-sized businesses in a partnership to pair Goldman’s brand with Amazon’s lending platform. The project could launch as early as March.

The move signals Goldman’s consumer banking arm, Marcus, is continuing its push to broaden its brand beyond the investment banking name for which it’s known. This potential agreement with Amazon comes somewhat on the heels of Goldman’s credit card partnership with Apple last year, which signaled the institutional giant is transforming into a broader financial services group akin to JPMorgan Chase.

Amazon benefits from the potential joint venture because the tech-titan has had a bumpy road with its launch of Amazon Lending in 2011. Offering financial services is in line with Jeff Bezo’s push to turn Amazon into an infrastructure powerhouse: The company already boasts its e-commerce platform, digital streaming services and hardware, cloud computing and web services, and even a partnership for grocery shopping with Whole Foods. Now, it’s turning attention to consumer services such as small-business lending.

For small and mid-size business owners or consumers with dreams of starting their own business, this partnership could be a sound option amid the sea of small-business lenders.  And in the current climate, those looking for such loans should try their luck.

As of the end of 2019, the approval percentage for small business loan applications at big banks rose to 28.2 percent, which is a new post-recession high. However, that increase was marginal – it was only one-tenth of a percent increase from the previous month.

Still, experts at Biz2Credit say this is a good sign and that 2019 was a “great year” for Small Business Association (SBA) lending. Particularly, lending at regional and community banks, which often process a lot of SBA loans, was quite strong. Smaller banks processed a record number of loans in 2019.

Experts also agree that we’re going to see more from big banks and financial institutions actively partnering with digital loan application technology and financial-technology (fin-tech) services. Case in point: Goldman Sachs and Amazon.

Also interesting to point out is that notable job gains occurred in the spaces of retail, food and hospitality. Many of these jobs were created by small businesses.

The takeaway for business owners and entrepreneurs: the lending space is going digital. Insiders note that regional banks and credit unions that continue to do business the old-fashioned way and resist partnerships with fin-tech firms will lose out. Especially as larger players use their resources to do just that.

So, if you’re in the market for a loan, shop around. Lenders are eager to add more to their balance sheets while interest rates are low and the economy is strong. Just because you’re looking to bring back those old-school vibes to Main Street, doesn’t mean you have to secure financing that way.

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Written by Danielle Kane

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