The Changing Role of the Commercial Banking System

By 02.02.21January 30th, 2023No Comments
Door to a bank vault

During 2020 the government and the commercial banking system responded quickly and empathetically to provide assistance and credit with flexible terms to business customers. But this benevolence can’t be sustained. Current uncertainty is exposing the weakness of conventional underwriting models forcing banks to reevaluate commercial portfolios.  

As the pandemic subsides and economic recovery begins, small business companies will start the long journey back to a new normal. This continuing period of poor performance profiles and high-risk environment transforms even the most appealing small business bank customers into an underwriting nightmare.  

In 2021, banks will change roles from being distributors of  government-sponsored relief packages to advocates of ardent risk management. 

To retain customer loyalty, banks must continue to advocate for their customers’ financial well-being. As banks withdraw from small business lending, they must refocus and drive customer engagement with other value-added services. What many small business owners really want in the year ahead is advice on how to navigate the remainder of the pandemic, and how to operate in the recovery beyond that. Bank representatives need to become relationship managers and branches need to become a place for meaningful conversations and trusted advice.  

Small Business Banking Needs 

Small business employs almost half of the nation’s work force. Supporting this demographic is more than tapping into a significant market, it’s essential to overall economic recovery. At present, large businesses are getting loans at some of the lowest rates in decades while small business companies struggle just to find a lender. Without access to credit, these businesses will be unable to rehire employees, restock their shelves and drive the economic recovery that is so desperately needed.  

As the pandemic ravages social and economic conditions, it is inspiring to recognize the resilience of the country’s entrepreneurial spirit. A recent survey revealed that 83% of small businesses had an optimistic view of 2021. As encouraging as this is, we need to look ahead and anticipate the next challenge.  

The pandemic will continue to affect sales and profits well into this year keeping small business in jeopardy. Banks’ pending mass exodus from small business lending seems ill timed, in fact it isn’t. Ultimately, this opens the door to a win-win-win scenario benefiting small business clients, the banks and alternative lenders. The banking system’s withdrawal from SBLs serves to open the marketplace even further to non-bank lenders who are more than ready to fill the gap with lending solutions designed specifically for middle-market borrowers.  

eCapital Logo

eCapital Corp. is committed to supporting small and middle-market companies in the United States, Canada, and the UK by accelerating their access to capital through financial solutions like invoice factoring, factoring lines of credit, asset-based lending and equipment financing. Headquartered in Miami, Florida, eCapital is an innovative leader in providing flexible, customized cash flow to businesses. For more information about eCapital, visit

More Great Reads

Why So Many SMB’s Are Considering Alternative Business Financing in 2023Blog

Why So Many SMB’s Are Considering Alternative Business Financing in 2023

Today, many businesses are assessing their operations to accommodate changing economic conditions and technological advancements. At the same time, many are assessing their financing to ensure it is aligned with…
The Right Financing for Your Business: Debt, Equity, or Invoice Factoring?Blog

The Right Financing for Your Business: Debt, Equity, or Invoice Factoring?

The use of financing is vital as it allows companies to leverage the time value of money (TVM) to put future expected cash flow to use to ensure the business…
What is a Borrowing Base and How Does it Impact Your Business Financing?Blog

What is a Borrowing Base and How Does it Impact Your Business Financing?

Most businesses rely on external financing to support their day-to-day operations. And in every situation, lenders will require assurances that they will be repaid in a timely manner. These assurances…