Getting your books together at tax time can be stress inducing. This is especially true if you’ve been audited before, or you’re one of the countless businesses that has been fined for filing taxes late, or you’ve underestimated and underpaid your taxes and have an unexpected tax bill.

Tax liabilities can be significant and disrupt a small business’s ability to pay its operational expenses. This presents an opportunity for banks and financial institutions to provide corporate lending solutions for these small businesses. 

Business owners are most likely to have a more comprehensive understanding of their company’s financial health during the tax season. They’re reviewing the previous year’s revenues, expenses, and debt and fine-tuning next year’s budgets and cash flow forecasts. 

Companies often discover they don’t have the capital on hand to support their goals and meet income tax liabilities. So, they look for solutions to meet both needs. Some will cut costs and strategize about increasing revenue, and others will explore corporate lending solutions tailored to their industry and growth plans. 

For banks and lenders, tax season also creates an opportunity to build relationships with these businesses. By understanding their needs and matching them with the best corporate lending solutions, you can build trust and long-term loyalty and growth for your financial institution.   

How SMBs Evaluate Their Financial Position 

Before lenders can offer effective corporate lending solutions, it’s important to understand how businesses determine their financial health. Tax season is typically a time when small business owners look at their operations, assess their cash reserves, and evaluate their potential financing needs. 

Understanding the financial needs of the business is the first step to matching them with the right business lending solution.

A few standard financial reports typically prepared before or during tax season help with this. These financial statements guide decision-making, assess creditworthiness, and determine the right commercial loan products.

Balance Sheet 

A balance sheet shows how much a business is worth at a given time. The report compares assets to liabilities. When the value of liabilities is subtracted from the value of assets, the result is the owner’s equity.  

A negative owner’s equity may indicate that the business is lacking working capital and may benefit from exploring corporate lending solutions.  A business owner can also use this report to measure liquidity ratios to determine how well their business can meet its short-term obligations.

Income Statement 

An income statement tells business owners how much profit (or loss) the company has generated over a measured period of time. To calculate profit or net income, the operating expenses are deducted from business revenues. 

If an SMB shows a loss, then the company’s current sources of income aren’t enough to cover costs. If net income is negative, the company may benefit from a business loan to increase marketing efforts or refinance current debt.  

Cash Flow Statement 

A cash flow statement shows how much money is moving in and out of a business. Cash flow is a reflection of the real-time liquidity a business has to pay for operational expenses. 

If a business has cash tied up in slow-moving inventory or outstanding customer payments, it may benefit from a corporate lending solutions like a short-term loan to boost its working capital.

Top Business Lending Solutions for SMBs 

Lenders and banks can optimize the opportunities at tax time by offering clients customized corporate lending solutions. Reaching out to new or existing clients at a time when entrepreneurs are already reviewing their financial statements presents a growth opportunity for banks that can offer additional funding or better loan terms through refinancing.  

1. Commercial Real Estate Loans 

Secured loans that use commercial real estate as collateral can be a great way for borrowers to relieve cash flow shortages at lower interest rates. Lenders can work with clients to examine their current debt schedules and identify opportunities to lower their monthly payments.

2. Small Business Administration (SBA) Loans

SBA loans are underwritten by SBA-approved lenders and banks and guaranteed by the U.S. Small Business Administration. They’re an affordable corporate lending solution for small businesses that don’t qualify for traditional bank loans. They have longer repayment terms and lower interest rates, making them an attractive option for businesses with tight cash flows. 

3. Term Loans and Lines of Credit 

Corporate lending solutions such as term loans and business lines of credit provide entrepreneurs access to the funds they need upfront and allow them to repay the debt over time. Lenders can implement a variety of digital lending tools and software into their tech stacks to accommodate managing different loans.  

4. Equipment Loans

Equipment loans are a common corporate lending solution for companies that use machinery to run their businesses. While manufacturing and construction businesses are most likely to need an equipment loan, other industries, such as the medical, restaurant, and hospitality industries, often need equipment financing. 

These types of loans are generally easier for small businesses to qualify for because of the equipment serving as collateral. An equipment loan also helps business owners preserve their cash flow and spread payments out over time.

How Banks Can Anticipate Funding Needs

Banks that want to boost their loan portfolios can leverage data analytics to identify small businesses that need financing. Data can uncover cash flow trends, seasonal income patterns, and industry-specific cycles to predict when a business is most likely to need a corporate lending solutions. 

Anticipating business needs can help lenders recommend timely financing options that are likely to be well-received.

Here are some strategies to consider:

  • Host webinars as tax season approaches and boost conversions with targeted email campaigns.
  • Assign relationship managers to build rapport with SMB clients that have a high potential for cash flow deficits that will likely need funding.
  • Provide insight into how tax planning aligns with wider strategic goals, such as a business expansion, increased staffing to meet customer needs, or investing in technology. 

Digital Lending Tools to Maximize Opportunities 

Lenders that make the most out of tax season know that to remain competitive, they must manage their loan portfolio efficiently. A digital banking platform can give lenders several advantages when growing their loan portfolios. 

Business Loan Automation 

Business loan automation streamlines the entire lifecycle of the commercial lending process from end to end. 

This includes:

  • The loan application and approval processes
  • Risk assessment
  • Credit decisions
  • Repayment schedules
  • Post-loan monitoring

When the right digital tools and software are used, a lender becomes more competitive due to a better borrower experience. 

Some benefits of automated processes include: 

  • Improved loan-origination process and workflows
  • Enhanced credit risk management
  • Faster underwriting processes 
  • Comprehensive loan management 
  • Automated repayment processes 
  • Better borrower data management 
  • Simplified tracking and reporting for lenders 

Artificial Intelligence (AI) for Lending 

Artificial intelligence (AI) is providing unprecedented advantages to lenders. AI enables lenders to make more accurate and data-driven decisions, identify risks or market changes quicker, and offer their existing and potential customers more personalized corporate lending solutions. 

Borrowers benefit from working with banks that use AI because it facilitates easier and faster loan approvals.

While AI improves the overall efficiency of loan practices, it also presents some challenges. Lenders must consider data privacy when using AI by investing in enhanced cybersecurity methods. Financial institutions must also ensure that the AI they use integrates well with existing core banking systems.

Conclusion 

Small businesses will need several corporate lending solutions while they’re in business. Combining personalized services with cutting-edge technology enables lenders to expand their reach while managing risk and increasing profitability in a competitive market.

As small businesses look to the next tax season, this is the perfect time to engage them proactively with targeted financing options. Banks can capitalize on these lending opportunities by preparing now and implementing automated loan processes and AI-driven data collection into their policies.  

FAQs About Corporate Lending Solutions

What are some strategies for banks wanting to increase their loan portfolios during tax season?

Banks can identify customer segments most likely to experience cash flow shortfalls during tax season. Then they can optimize their marketing campaigns to target and convert those clients. Making tailored offers to meet business needs can also lead to higher conversions among leads.

How can banks boost their profitability when providing corporate lending solutions?

The answer isn’t to simply write more loans. The answer is boosting operational efficiency and making smarter data-driven solutions. Enhanced insights into a business can increase revenue for banks while lowering the risk of loan defaults.

How can lenders cross-sell loan products during tax season?

Loan servicing teams can leverage account data such as credit usage, cash reserves, and previous borrowing behavior to identify business needs. With this information, financial institutions can tailor loan offers to enhance customer engagement.

What tools help financial institutions improve their lending processes?

Digital lending tools that streamline onboarding, automate underwriting, and reduce loan approval times can enhance the customer experience. At the same time, these tools help banks process and close more small business loans at faster rates than traditional underwriting.

How can an SMB lending platform optimize a bank’s corporate lending solutions?

An SMB lending platform to facilitate all a lender’s corporate lending solutions has many advantages. It shortens loan turnaround times, increases loan volumes, and improves the borrower experience while delivering smarter, data-driven loan decisions. It also streamlines regulatory compliance and offers real-time visibility into a loan's performance to better manage risks.

Ready to maximize your bank’s financing solutions next tax season and beyond? Biz2X’s award-winning Fintech platform streamlines small business loan originations, helping top banks grow their loan portfolios faster while meeting the evolving needs of today’s business owners. Contact us for a demo today!