Community Banks and Regional Banks Benefit from New Approach to Small Business Lending

The American Banker documents today that community banks need a sleeker approach to small business lending.  The article makes the great point that most of the 28 million of the 28.5 million small businesses are sole proprietors with just one or a handful of employees.  They have checking accounts with community and regional banks, but not any lending relationship.  Yet, the FDIC Survey of Small Business Lending shows half of these have lines of credit averaging $12,000 elsewhere, reflecting a total revenue market of $23 Billion.  The American Banker points out that most community and regional banks have the same lending and underwriting process for all small business loans.

“Prospective borrowers are required to provide far more documentation than is necessary for prudent underwriting.

It is not uncommon for banks to employ the same application and underwriting processes for all loans, regardless of the size or complexity of the request or the risk profile of the borrower.”

                       

Claude Hanley in the American Banker 2/25.2015

A more automated, customer-friendly process is a competitive necessity, particularly today with the booming digital lending by non-banks to small businesses as documented in the Harvard Business Review Whitepaper: “The State of Small Business Lending”

The good news is automated, digital lending to small business done through community and regional banks completed in minutes online with no paper is available with our services like PaySound Business and CashFlow Checking.  The banks keeps all the revenue and balances but leverages a cloud-based technology platform requiring no integration to the core and with no customer-identifying information in the cloud.  It is time for your bank to start leveraging digital lending to provides services to your customers through your retail branches requiring no lending knowledge or directly to customers on the web.