The increase in business formation in recent years has remained elevated—a trend that is expected to continue—presenting a unique opportunity to create digital relationships with new business owners. As the economy transforms the demand for business credit is set to surge1. Firms looking to capitalize on this need should prepare for evolving expectations from a digital buyer demographic, who has low tolerance for barriers. Credit risk automation can help firms to be responsive, while mitigating risk exposure.
The pandemic has ushered in a new trend in increased new business formation1, and it’s expected to continue. As more new businesses form and economic conditions transform, pent-up demand from the small business market will be unleashed. Customers now expect seamless digital experiences and self-serve models to carry out their business needs. Firms can be first to the table to build digital relationships with small business customers through credit risk automation. New tools can automate the ability to render small business credit decisions, reducing the friction and time spent on manual business credit applications, underwriting or approvals.
The nature of B2B buyers: younger buyers in solo ventures demand instant digital applications and self-service options
Business buyers are changing, and most small businesses are solo ventures. The face of business buyers is changing according to Forrester’s global research, “younger generations of business buyers born after 1980 are having their say and now represent the majority of business buyers globally at a whopping 64%.2” The 2023 Forrester’s annual Buyers’ Journey Survey shows that the younger generation of buyers also prefer to go through different channels to buy, like self-serve methods via external marketplaces or digital applications 2.
Over 90% of the nation’s small businesses are solo ventures.
U.S. Small Business Administration Office of Advocacy 2024 Report
Small business ownership breakdown by generation
- There are 34.7 million small businesses in U.S., 27.1 million are managed solely by their owners and don’t employ any additional personnel.
- Gen X owns most small businesses (47%), followed by baby boomers (40%) and then millennials (13%), with the average age to start a business as 35 years old.3
The art of the possible: How to automate your business credit processes to scale quickly and efficiently
The breakneck pace of innovation has caused an uncomfortable scenario for firms looking to innovate without a large budget or much room for error and delays. How can firms apply credit risk automation fast, with minimal resources, to stay competitive as the small business market continues to change?
The modern catalyst for growth is knowing when to buy or build new capabilities. It can be difficult to actualize the right combination of automation, data and tools to build the best operational processes that deliver a customer experience tailored to the needs of small business customers. This difficulty is due to complexities in business models, resource capacity and the ability to create mindshare with key decision-makers on the subject.
Onboarding new data sources or tools and then adapting them to existing systems can often be a time-consuming undertaking within organizations. Modern firms typically require strong technical application vetting and vendor management protocols to avoid systemic risk and fraud. However, this creates an odd scenario for teams that urgently require sophisticated tools within an organization: Once onboarded, the process is so long that the tools are already obsolete. Your credit risk automation strategy should aim to include easy-to-implement tools that can easily be approved.
Knowing when to buy or build a solution can be a competitive differentiator in gaining speed to market. B2B firms should reflect on the rapid market shifts within the last few years when considering their level of proficiency in building solutions at the pace of the market. Firms should envision and optimize their operations to enable automation and look toward technology partnerships with enterprise solution providers that help build the technology stack. Finding strong technology partners that can deliver robust data and solutions to solve a multitude of challenges with a single vendor relationship is an important differentiator when time is a valuable resource. Firms should consider finding partnerships that also create mutual value in the form of delivering analytical insights back into their business.
Experian’s Business Information Services can help you to understand how easy it is to bring on web-based credit decisioning and application processing within your small business customer experience and leverage our wealth of experience, vast datasets and commercial solutions to achieve profitable growth.
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Source Information
- 1U.S. Small Business Administration, Business Formation Statistics
- 2Younger Business Buyers Are Having Their Say, Forrester, February 2023.
- 3Forbes Advisor, Small Business Statistics of 2024, January 2024
