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Monday, August 24, 2015

Micro Business Lending Costing <$1,000/Loan

Small business loans $50k or less, often called micro loans, make up 40% of all business loans, and average $14k per loan. These loans represent a market of $30 billion in revenue, an amount equal to one quarter of the total $117 Billion revenue of banks under $5 Billion.  Yet, most community banks do not serve this market, and even find 80% of their business checking customers have no business loan relationship with the bank.

Why? Because community bank current underwriting and service practices, so successful with larger loans delivered by experienced commercial bankers, cost $3,000 or more per loan annually to attract, underwrite and monitor loan performance.  Loans averaging $14,000 can only generate about $1,400 in interest and fee revenue, not even half of the cost to create them.  How can community banks, already serving small business deposit relationships, profitably capture this large micro loan market opportunity?  

The answer is by automating the loan process with new, in-house, cloud-based digital technology now available to serve this market at a total cost of less than $1,000 per loan.  Sound and proven underwriting uses the business owner’s credit information and business deposit information.  Cloud-based access allows defining loan amount available for a customer in seconds with no customer-identifying information at risk.  Set up can be accomplished in minutes with proven digital e-sign documentation and compliance.  And loan risk rating, monitoring and ongoing reporting can be fully automated.

The result, delivered online, mobile or by retail team members with no lending experience, drives loans set up in minutes with revenue averaging $1,500 annually per loan to customer relationships you already have for a cost less than $1,000.   Want to see an example?  Check out our Business MinuteLender.

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