As the novel coronavirus forces social distancing and shelter-in-place mandates, many small businesses are being bled dry as they close their doors. Digital-only banking startups that serve small business clients, meanwhile, are figuring out what actions they can take to help their struggling customers. 

“Many of our customers are seeing a huge, immediate drop in revenue,” said Cameron Peake, CEO of Azlo, a small business banking platform majority owned by the $760 billion asset BBVA. “Many small business owners have been forced to close down or lay off employees. They’re finding themselves leading through challenging times, without a way to accurately predict what’s coming next.”  

For small business banking startups, the unprecedented situation is forcing them to rethink their offerings as customer needs change. According to research from BlueVine, 40% of small businesses say they will go out of business in a month without government support. Whether it’s educational resources, lending products or invoicing upgrades, digital banks are looking at a variety of new products and services as coronavirus wreaks havoc on the small business community.  

Multiple small business banking platforms are trying to educate their clients on the best options during difficult times. Peake said the San Francisco-based Azlo has always created educational resources for clients through blogs, webinars and videos. The company is now focusing on specific topics, like managing gaps in cash flow, choosing between different funding options and developing business ideas.  

Novo, a small business banking startup based in New York, is looking into how it can educate customers on loans from the Small Business Administration as government programs roll out state by state. The company told Bank Innovation in September it had “a few thousand” customers. According to Novo founder Tyler McIntyre, his company is still refining the best ways to reach clients, but texts and phone calls are in the works to reach clients about these programs.  

“We have proactively looked at our customer base and looked at the addresses to see which have retail addresses, which have home addresses, and which are brick-and-mortar that are affected,” McIntyre said. “As the SBA lending program rolls out state-by-state, we are giving some insight on how [clients] can leverage those programs.” 

With small businesses stretched for cash, many banking startups are also looking to launch lending products for the first time. Although McIntyre said Novo doesn’t have any immediate plans to get into lending, the company is determining which loan products could best help their clients. With data from clients’ transaction history and accounting systems, he said Novo could provide seamless underwriting.  

Peake said Azlo is pushing harder on certain projects as its customers struggle. “We’ve been planning to start offering new lending options in the future, and this has suddenly become a much higher priority,” she said. 

See also: Challenger NorthOne raises $21M to solve pain points for small businesses

Some companies are using invoicing products to reach customers affected by the coronavirus. Austin-based Joust, which had about 4,000 clients as of January, is using its invoice guarantee feature PayArmour to help small businesses and freelancers affected the cancellation of the South by Southwest festival. PayArmour guarantees payments to freelancers who are owed money by clients at a cost of 6% for instant payment and 1% for payment in 30 days.

“If there is a contract between a freelancer or small business and someone here at South by Southwest, we can purchase that invoice from them and collect on their behalf,” said George Kurtyka, chief operating officer at Joust. “In those situations where [clients] are being stiffed and they’re not getting paid, we’ll protect them with our factoring product.” 

Toronto-based NorthOne, meanwhile, is extending a lifeline to small businesses through free banking services. The company, which recently told Bank Innovation it has 130,000 customers, is waiving its subscription fees for businesses in states most affected by the pandemic as well as restaurants, food service and hospitality businesses. NorthOne normally charges $10, $20 or $50 per month, depending on the package. 

Small business banking startups also recognize an economic recession could create new opportunities for many consumers. “Layoffs are a real possibility, so people are taking steps to start that business they have always wanted,” McIntyre said. He added that about 60% of Novo’s new clients are usually existing businesses that have switched from a competitor and 40% are new businesses. However, according to McIntyre, those numbers have switched since the pandemic.  

Peake said Azlo is looking at a service to help laid-off employees become self-employed. “Azlo is a great platform for new, small digital businesses, so we think we’re in a great position to help them. This project is in the early stages so I don’t have a lot of details yet, but we’re moving forward quickly and hope to have something available in the next few weeks.”