The State of SME Lending: How Technology Can Help

April 23, 2010
Industry Trends
Global, Asia-Pacific, EMEA, Latin America, North America

Abstract

There are tangible signs SMEs are taking countermeasures and are looking at alternative (i.e., nonbank) suppliers of cash to run their businesses.

Getting access to credit is difficult, especially for small and medium enterprises (SMEs). Although central banks are launching rescue programs to guarantee loans to SMEs, and pouring billions of cash guarantees to offset the risk perceived by banks, banks are still not lending for a number of reasons. A lack of loan supply does not reflect a lack of demand from SMEs. They need financial support to survive and prepare for the expected economic recovery. In this report, The State of SME Lending: How Technology Can Help, Celent analyzes the current lending policies of banks.

“The signs of disaffection and disintermediation from SMEs are there for banks to watch carefully and take the appropriate countermeasures,” says Enrico Camerinelli, Senior Analyst with Celent’s Banking Group and author of the report.

This report examines how technology can support banks in regaining SMEs’ attention and wallet share by determining the criteria that corporate lending management systems (CLMS) must have to attract banks’ interest and serve the demands of SMEs for more service and attention.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

3

Status of Corporate Lending

4

 

Europe

4

 

US

6

 

Asia

7

 

Loans Are Short, But Not Corporations’ Need for Financing

9

Central Banks Launching Rescue Programs to Guarantee Loans to SMEs

11

 

Opportunities in the SME Sector

11

Banks Are Still Not Lending as Expected

16

Regulatory Pressures and Refocus on Balance Sheets

18

Governments Holding Bank Shares

20

 

More Uncertain Economic Outlook

21

 

Regulatory Pressures and Reduced Tolerance for Risk

21

 

Administrative Costs

22

 

Use of Credit Cards

22

 

How Banks Explain What Happens

24

 

Summary

27

Examples of Alternative Borrowing Solutions ("Shadow Banking")

28

 

SMEs Still Need Credit

28

 

Lending Networks

30

Lending Strategies and Technology Selection Criteria

35

 

Origination

37

 

Electronic Bank Account Management (eBAM) Capabilities

38

 

Credit Bureaus

38

 

Accommodating the Borrowing Lifecycle

38

 

Knowledge Management

39

 

Measuring Customer Service

40

 

Integration Platform

40

 

Document Preparation

40

 

Collateral Management

41

 

Multilaterals

44

 

Workflow Management

45

Conclusions

46

Leveraging Celent’s Expertise

47

 

Support for Financial Institutions

47

 

Support for Vendors

47

Related Celent Research

48

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