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Alt credit gains ground, banks form new FinTech partnerships.

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TLDR:

  • Banks are collaborating with FinTech companies to provide alternative lending options to borrowers, especially small businesses.
  • Approval rates for small business loans have been declining, prompting the need for alternative channels.

In recent years, traditional lending channels have become more difficult to navigate for small businesses seeking funding. The Federal Reserve reported a decline in approval rates for small business loans since 2017, leading to operational challenges for many smaller firms. To fill this gap, alternative lending platforms and digital providers have emerged, offering advances and loans backed by investors based on a variety of data points, including payment trends.

One recent partnership in the alternative credit space is between BNY Mellon and CIFC, expanding access to U.S. direct lending strategies for clients across different regions. Additionally, JPMorgan Chase has been discussing partnerships to broaden its private credit efforts, highlighting the increasing importance of alternative lending channels for banks.

With the introduction of platforms like Nova Credit Platform, lenders are transforming how they manage and analyze consumer credit data, offering new opportunities for small and medium-sized businesses to access working capital loans. While only a small percentage of SMBs have found bank loans readily available, the tie-ups between banks, FinTechs, and alternative lending channels could provide more options for borrowers and boost revenues for lenders.

Overall, the collaboration between banks and FinTech companies in the alternative credit space is gaining ground, offering new opportunities for borrowers and lenders alike.

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