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Toward the tail end of 2024, small and mid-sized businesses (SMBs) were propelled by a reignited optimism, which bled into the beginning of 2025. However, disruptions within the current economic landscape have tempered that optimism, leading to a spike in uncertainty among SMB owners.
Although growing uncertainty is impacting optimism among SMB owners, two-thirds of SMBs remain positive about their 2025 financial outlook, according to the U.S. Chamber of Commerce. Unlocking liquidity is key to SMBs achieving growth, whether through increasing profit margins, improving inventory management or securing working capital financing. With the right solutions in place, credit unions are well positioned to help SMBs access the capital they need to grow and establish long-term relationships, even during times of increased uncertainty.
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How Credit Unions Can Best Serve Their Local SMBs
For small businesses, timing is critical, and despite the business finance market being worth trillions of dollars, many small businesses still struggle to obtain the capital they need when they need it. Small businesses require fast and seamless access to capital to cover expenses and quickly seize emerging opportunities when they arise. According to the U.S. Chamber of Commerce’s Small Business Outlook on March 17, 2025, 58% of SMB owners reported capital outlays in the last six months with 19% planning capital purchases in the next three months.
Many fintech firms and forward-thinking financial institutions have already invested in automating the SMB lending process to enable faster funding decisions. To compete, credit unions must keep pace, either by partnering with the right Lending-as-a-Service (LaaS) fintech providers or deploying business lending solutions that integrate seamlessly with their existing systems.
Making SMB Lending Viable
Despite the growing market opportunity, some credit unions may hesitate to pursue small business lending due to perceived risk or operational challenges.
Traditionally, SMB lending has been associated with high origination costs and fragmented manual processes – making it difficult to scale efficiently. However, leveraging data-driven automation can dramatically reduce costs, mitigate risk and enhance the borrower experience.
Existing member data is a powerful but often underutilized asset in overcoming these hurdles.However, fragmented and outdated platforms with siloed member data hinder credit unions from creating a unified view of their members’ relationships. Lack of data infrastructure and real-time analytics create operational challenges in loan processing and increase processing timelines. This can lead to increased operational costs and frustrated business owners.
It is imperative to look beyond traditional credit scoring for loan decisioning. Identity profiles for small business customers are multi-faceted, so looking beyond traditional data sources to form a 360 view of small business identity is critical. Leveraging AI-driven risk models enables credit unions to better evaluate risk, detect fraud and streamline decision-making.
Credit unions that embrace an integrated approach to data analytics and insights are able to grow their business membership, without incurring undue risk. By moving beyond traditional credit scoring for loan decisioning, and onto AI-driven risk models with enhanced fraud detection, they can also boost operational efficiencies.
There are some key considerations for credit unions as they implement more data-driven fintech strategies. Credit unions will want to ensure that their business lending technology investment enables them to:
- Compete more effectively: Offer SMB borrowers a streamlined, fully digital lending experience that rivals fintechs and large banks.
- Automate and accelerate SMB lending: Simplify application intake, decisioning and approvals with integrated KYC, KYB and credit scoring.
- Maximize data insights: The quality of the data directly impacts the speed and accuracy of lending decisions. Clean, unified data enhances speed and accuracy while providing a more holistic view of the SMB applicants.
- Expand lending opportunities: For applications that fall outside of a credit union’s loan requirements and standards, working with established funding network partners enables credit unions to still provide value and protect the member relationship while generating referral income.
- Enhance portfolio performance: Leveraging automated portfolio monitoring to track member data within a credit union’s business loan portfolio helps lenders proactively identify potential risks, reduce defaults and improve overall portfolio performance.
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