Underwriting Sound Bank Small Business Loans Online In Minutes

A booming number of digital lenders provide unsecured small business credit line approvals in minutes.  Their rapid growth is documented in studies, ranging from the Harvard Business School “The State of Small Business Lending” to business publications like Fortune’s, “Why Outline Lenders Will Take Off With Small Businesses.”   Banks have the small business customer checking accounts, but have not served the 80% of these customers  who want business loans under $50,000.  Yet, this marketplace represents a $30 Billion market.  How can banks soundly underwrite and deliver small business loans to this segment?

 

Digital lending technology provides the answer today in three steps:

1.      Underwrite loan approval in seconds and soundly, with proven credit report and deposit data immediately available.

Underwriting with credit score information on business owners has a proven, 30 year history of sound underwriting, all documented in governance, process and validation. Even a high mid-point estimate of 6% can be reduced to 4% by adding deposit activity and checking history.  This data is immediately available for automated decisions in second. Cost of losses for an average loan of $15k is $600 vs the $2,000+ research shows the typical community bank spends underwriting and monitoring time, paper and systems.

                         
Small business customers want approval in seconds, as research shows, even if full set up of the loan has added steps.  In the digital world, the information to underwrite small business loans to the 90% of small businesses that are sole proprietors or have ten employees or less can be captured online in seconds.  Many banks have automated years ago small business loan approvals under $50k by using primarily the owner/guarantor’s credit information and the deposit volumes of the business at the bank. Banks can provide automated analysis of credit scores and history of deposit volumes of their customers in seconds for loan approvals, and use the same technology to risk-rate and monitor these loans for compliance in an automated way.  This is proven and documented sound underwriting.

2.      Deliver through the cloud with complete security.

The cloud technology today allows users to access information from any location and device quickly and easily, relying on no critical information such as account numbers or social security numbers.  The bank is at no risk because if the cloud data center is ever compromised, no critical customer information is in the cloud.  Putting proxy information about deposit and other information on your bank customers in the cloud allows customers to identify themselves with online devices and just a handful of pieces of information, authorize the pull of their credit information and get approval of small business loans in seconds.  This process is just as they would have been approved if the bank had gathered this information manually. Once approved, the customer can e-sign the required documents and disclosures and provide electronic information to the bank to set up the loans.  All compliance in managed consistently, no paper is generated but full documentation is stored on the bank’s core.

3.      Market loans online or in branches requiring no lending knowledge.

The digital delivery of small business for banks not only leverages customer online access but simplicity for in-branch service and sales call.  Retail team members with no lending experience whatsoever can call on business checking customers and guide them through loan approval and set up in minutes on tablets, smart phones or computers.

These processes are proven and in place in the banking industry and you can see them in our demonstration site, MinuteLender.  It is time to compete with the burgeoning small business digital lending marketplace and easily serve the business checking customers where you already have a deposit relationship but no loan relationship.  It is the highest revenue growth opportunity available for banks.