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.