In the wake of the 2008 financial crisis, small business lending from traditional banks plummeted, leaving many entrepreneurs scrambling for working capital. This funding gap gave rise to a new wave of alternative lenders and online financing platforms, reshaping how small businesses access capital.
But as these FinTech-driven lenders grew in popularity, traditional banks began taking notice, and strategic partnerships between banks and alternative funders are now changing the lending landscape once again.
Why Did Banks Step Back from Small Business Funding?
Following the Great Recession, banks grew more risk-averse, especially when it came to loans under $1 million. For many banks:
- 📉 Regulatory constraints increased risk thresholds
- 💸 Smaller loans weren’t profitable enough to justify the effort
- 🕒 Approval processes were lengthy and complex
This left small businesses — especially startups and companies with less-than-perfect credit — with few viable financing options.
The Rise of Alternative Funding and FinTech
Alternative lenders quickly stepped in to fill this gap. Leveraging FinTech (financial technology), they introduced:
- 💻 Streamlined, digital application processes
- ⏱️ Faster approvals (often in under 48 hours)
- 📊 Data-driven underwriting models that assess business performance, not just credit scores
- 💼 Flexible funding solutions such as merchant cash advances and revenue-based financing
This innovation forced traditional banks to reevaluate their approach and collaborate with FinTech innovators to remain competitive.
How Are Banks Partnering with FinTech and Alternative Funders?
To stay relevant in the small business financing space, many banks have chosen to partner with or license the technology developed by alternative lenders.
Notable FinTech-bank partnerships include:
- 🟩 Kabbage partnered with ScotiaBank, Santander, and ING, licensing its tech to improve loan offerings.
- 🟦 JPMorgan Chase partnered with OnDeck Capital for rapid small business lending, and later with LiftFund for microloans.
- 🟥 Wells Fargo launched its own platform, FastFlex, to offer digital small business credit.
- 🟨 Citizens Bank rolled out its own digital small-business loan solution in 2017.
These collaborations allow banks to scale quickly, reduce approval times, and offer better access to working capital for small businesses.
What Does This Mean for Small Business Owners?
For business owners, these partnerships are a big win.
Here’s how small businesses benefit:
✅ Faster Loan Decisions – FinTech-powered underwriting drastically cuts wait times
✅ Higher Approval Rates – More inclusive models that go beyond FICO scores
✅ Greater Access to Capital – More loan types, including merchant cash advances and revenue-based funding
✅ More Flexible Repayment Terms – Solutions tailored to your business’s cash flow
📊 According to the Federal Reserve, approval rates for small business loans have increased in part due to the expansion of online lending.
Are Alternative Lenders Still Relevant?
Yes, and more than ever.
As traditional banks team up with FinTech firms, it validates the role of alternative lenders as critical players in small business financing. Many small and mid-sized businesses continue to rely on these lenders for:
- 🚀 Fast turnaround times
- 📉 Fewer credit restrictions
- 🧾 Streamlined applications
- 🔁 Flexible funding products that evolve with their needs
Ready to Grow? Consult with CFG Merchant Solutions
At CFG Merchant Solutions, we specialize in helping underserved small businesses access the working capital they need — without the long wait times or rigid underwriting standards of traditional banks.
Why CFGMS?
- 💼 60+ years of institutional finance experience
- ⚡ Rapid approvals and funding in as little as 24–48 hours
- 🔄 Flexible financing options built for real-world business needs
- 🛠️ Proprietary tech blended with personalized underwriting
👉 Apply online now or contact us to learn how our alternative funding options can power your next stage of growth.
Frequently Asked Questions
Q: Why are banks partnering with alternative lenders?
A: Banks are leveraging FinTech platforms to offer faster, more efficient small business loans — improving profitability and customer satisfaction.
Q: Are alternative lenders still useful if banks are reentering the market?
A: Absolutely. Alternative lenders offer flexible options, higher approval rates, and faster funding — making them a vital choice for many businesses.
Q: How fast can I receive funding with CFGMS?
A: Many businesses receive funds within 24 to 48 hours after approval.