Digital Small Business Lending Drives Biggest Revenue Growth Opportunity for Community Banks

Community banks have a huge revenue and earnings opportunity hiding right in front of them in plain sight:  automated digital lending to small business of loans less than $50k.  40% of all business loans are less than $50k, but this market has long been ignored by community banks.  80% of their business checking customers have no lending relationship with the bank, but most do borrow money elsewhere.  The underwriting and delivery service models for community banks, however, do not match up to the lower risk, complexity and needs for this segment which average using a $12,000 loan.  Now digital lending technology allows sound underwriting and low-cost digital delivery profitably to these customers.

The May issue of Forbes provides the clear case highlighting how Kabbage, a digital lender, is a booming in serving exactly this segment.  In the article, “The Six Minute Loan,” they show how customers with checking accounts and strong credit scores pay willingly for loans through Kabbage rather than their bank:

"Jennifer Kirk who owns Posh Puppy Boutique was turned down by her bank after lengthy applications, in-person meetings and three weeks of waiting even with her strong business and 700+ credit score, but was approved by Kabbage in six minutes online."

And the Forbes article points out that is not just specialized small businesses that find the ease and simplicity of digital lending appealing:

“Two top small business groups that turn to OnDeck digital lender are doctors and dentists.  Many are happy to pay a premium for simplicity and getting funded in a day or two”

Community banks can provide a turn-key cloud-based platform today to serve this market and their own customers rather than lose the revenue opportunity equal, in comparison, to their total overdraft income.  Best of all, this is new revenue and does not cannibalize any existing overdraft or other revenue.  It is time to put CashFlow Checking digital lending strategy to work for you.