Community banks that are considering entering the small business lending space are already challenged by several barriers to entry:
- Inefficiencies in traditional loan processing.
- Changing regulatory guidance.
- The belief that small business loans are not profitable.
- A lack of quality lending opportunities to put their deposits to work.
- New competition from emerging categories, including fintechs, challenger banks and neobanks.
Given these obstacles, it’s not surprising that many community financial institutions have chosen to steer clear of small business lending — but there is a solution powerful enough to overcome all of these obstacles. This solution allows community financial institutions to profitably offer small business loans that are efficient, convenient and compliant. And that is the power of a digital loan platform.
Digital lending platforms leverage end-to-end, cloud-based technology to automate the entire lending process — from application and underwriting to set up, review and renewal. Banks gain the competitive muscle to provide small business loans efficiently, quickly and profitably.
Here is our 12-part battle plan for small business lending victory:
1. Save Time and Cost
A turnkey platform is automated, reducing the lengthy manual processes involved and eliminating the need for additional loan officers. It costs significantly less to originate each loan, even the smaller loans.
2. Automate Booking
A good digital platform gives banks the ability to import loan files directly into the core to book and fund the loans. It should also integrate with numerous third-party systems to automate booking and funding the loan.
3. Expand the Pipeline View
The platform should offer the analytics and the ability to track how many people are viewing, starting and completing a loan application, so you can do a better job forecasting the week ahead.
4. Use a Dynamic, Intelligent Application
Digital applications usually employ a rules engine to guide the borrower through each step and identify exceptions or incomplete sections. The best platforms will recommend the most appropriate types of loans or redirect users to other channels.
5. Your Underwriting Policy
A digital platform will use your institution’s specific underwriting standards for each specific loan product. It will not force adoption of its own embedded underwriting standards.
6. Track Loan Status
A platform can give bankers better visibility to the stages that have been completed at each step of the process, helping to facilitate cross-departmental communication and accelerate the loan’s processing time.
7. Renew and Review
For a bank’s existing portfolio, a digital platform will automate the collection of data, send communications to borrowers and provide a dashboard view of annual renewals or interim reviews, reducing time and cost by as much as 50%.
8. Automate Financial Analysis and Spreading
Cloud-based software solutions eliminate the need to manually spread deals. The lending cycle becomes more productive, since applicant qualification is determined in seconds.
9. Manage Documents Effortlessly
All documents should be housed in one central location. This creates a user-friendly portal for both the customer and lender, where all materials can easily be collected, requested, shared, processed and tracked.
10. Maximize Loan Volume
Not only can a digital, automated system increase the profitability of each loan, but the bank will be able to dramatically increase loan volume. A digital application is like having an army of loan officers at the ready 24/7.
11. Aggregate Data, Minimize Risk
Digital technology collects and aggregates all of the data a financial institution needs to decide on a loan, then compares that data to its unique credit policy and risk rating metrics.
12. Utilize Third-Party Data and Analytics
Any digital platform should be integrated with the industry’s leading third-party sources to access necessary information more efficiently, such as small business credit data, tax records, regulatory and compliance updates and more.
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