Three Powerful Small Business Trends Brought About by COVID-19
The COVID-19 pandemic brought devastation to small businesses. However, it also forced business owners to improvise and develop robust processes that would make them more resilient. While the world isn't out of the woods just yet in terms of the pandemic, new trends have arisen that cannot be ignored.
Financial firm Capital One surveyed small business owners at the end of 2020, and 67% of respondents expressed confidence that their revenues would return to pre-pandemic levels. There's no doubt that new financing trends are lending confidence to small business owners.
Here are 3 trends that reflect the positive change that SMBs have experienced thanks to the pandemic.
Credit Lines and Lending
As the pandemic hit towards the end of Q1 2020, many banks and credit unions pulled credit offers and decreased credit limits drastically. This left many small businesses without valuable funding and cash flow shortages. Advances in technology meant that credit lines were decreased in a few weeks instead of months as had previously been the case.
However, as the pandemic has normalized and as vaccination programs continue to roll out, banks are loosening their purses again, and this means SMBs in 2021 can expect bigger credit lines. If your business is in a sector that held up well during the pandemic, such as e-commerce, healthcare, construction, and professional services, then accessing credit lines is even easier.
A key development during the pandemic was the rise of online lenders and small business owners moving away from traditional financing outlets. As big banks rejected loan applications, online algorithm-driven lenders stepped in to fill the breach.
The result was a massive rise in online lending that has left banks scrambling to recapture their old business sources. As bond yields remain low thanks to the Federal Reserve Bank's policies, lending remains a great option for credit unions and big banks.
Competition between online fintech companies and banks means business owners can access credit at more favorable rates than before, and this means a lesser interest burden for SMBs operating on thin margins.
Automation and Transformation
Digital transformation was a buzzword thrown around by enterprises in the years before the pandemic. However, as physical sales outlets shut down once lockdowns began, businesses discovered that digital transformation was a necessity. Business owners who pivoted online managed to save their SMBs, while those who could not struggled.
A key aspect of digital transformation was automating payments and invoicing. SMBs have long relied on posting checks manually in the mail, stuffing envelopes, and depositing checks by walking down to the bank. Lockdowns made these processes untenable.
The only solution was to invest in electronic solutions that would remove the need for manual tasks. These software solutions contain everything from small business invoice templates to automated follow-up workflows that decrease collection times.
One of the better features of these solutions is the ability to handle disputes automatically and establish a clear audit trail that makes compiling financial statements a breeze.
Aside from payment collections, mid-sized businesses invested in platforms that automated inventory reordering and cash management. Some of these platforms use AI to predict buying trends and alert businesses to times when they need to stock up on products.
Analytics for small businesses are more accessible than ever before. Thanks to the democratization of data, business intelligence solutions began offering toned-down versions of their enterprise offerings. As a result, even SMB owners can now drill deep into their customer data and unearth trends that can help them combat the next challenge they face.
SMB owners tend to go at challenges alone and want to do everything by themselves. However, the pandemic shined a spotlight on the need to execute processes efficiently. Many owners discovered that their old DIY approach didn't stand a chance of working and that the only way to thrive was to hire out tasks they weren't good at.
This meant many SMBs signed up for cloud-based services that offered bookkeeping, accounting, and cash management. Leveraging third-party expertise is the new mantra of success in the SMB world and this has expanded the ecosystem considerably.
SMB owners can now rely on a greater degree of professional services and solutions that will help them operate their businesses. Marketing is another area that has witnessed increased investment from SMB owners.
With customers increasingly shopping online, and thanks to intense competition from online-only sources, SMB owners have had to adapt to the digital marketing landscape. They've discovered that online advertising isn't just about uploading a few photos of products and waiting for clicks to come in.
As a result, digital marketing expertise has increased in SMBs thanks to many business owners opting to invest in it. Owners have even outsourced this task to agencies that cater to small businesses. The result is a better understanding of how online advertising works, and a greater focus on what the business does best.
Positive and Negative
There's no doubt that the pandemic hasn't been kind to SMBs. However, every cloud has a silver lining. As these trends show, the pandemic offered SMB owners a chance to adapt and become more resilient. Many owners have executed this perfectly and are poised to thrive when the world emerges from the COVID pandemic.
(Devdiscourse's journalists were not involved in the production of this article. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)