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.
