According to the U.S. Small Business Administration, at 30.7 million and counting, small businesses account for 99.9% of all American businesses. This is a massive market with the potential to drive impressive revenue for banks. Community banks and credit unions are poised to forge mutually beneficial partnerships with small business owners—but few are efficiently lending to this lucrative audience. 

For credit-worthy business owners, the capital they seek can be the difference between staying open or shuttering their doors. Small businesses need funding for repairs and replacements or to cover some of their seasonal overhead, and they typically need this money within a few days—not a few weeks. 

A technology-driven lending process can help these small businesses thrive and make working with this cornerstone of the U.S. economy more profitable for you. Here are five obstacles that can impede your small business lending—and ways you can improve your efficiency.

  1. Using manual processes. 

Paper applications are cumbersome for business owners to fill out. And they’re time- and labor-intensive for your loan officers to sort through. A traditional small business lending application takes between three and five weeks to process, according to research firm McKinsey. This system doesn’t just place burdens on your staff—it increases the room for human error and delays. Automating processes can increase accuracy and help you fulfill requests swiftly. 

  1. Doing business face to face. 

As a community bank, credit union, or small lender, you value customer relationships and connections. You like the in-person interface with your clients. But, to business owners, a visit to the bank is time away from their company and customers. Over 60% of small business owners want to apply for loans online. Offering a digital option benefits your small business customers, and allows you to serve more of them and provide a decision almost instantaneously. Even better? By automating the loan origination process for small businesses, you free up your loan officers’ time to solidify relationships with your large business customers. 

  1. Looking at the wrong data to inform your decisions.

Small business lending typically uses the same process as commercial lending. Yet nearly 60% of small business loan requests are under $100,000. Many institutions are relying on the same information that is used for a $1M+ request. Small businesses are constantly popping up. Many profitable ones don’t have two or more years of financial statements—or haven’t built up their personal credit score to back up their company’s success. Rather than relying on traditional data, it’s better to look at metrics that are more relevant for a small business—factors like cash flow, which give a truer picture of creditworthiness relative to the amount requested. 

  1. Not implementing technology solutions.

Only 26% of banks are using an online origination channel for their small business lending. Over half of all small business owners are willing to pay more for convenience and speed vs. getting lower rates. Failing to incorporate technology-based solutions into your processes costs you time and potentially business—customers will do their research to find a lender that meets their needs for speed and convenience. 

  1. Automating only part of your lending process. 

Automating only the front end or the back end of your lending process isn’t necessarily getting your customer to their ‘yes’ or ‘no’ decision any faster. At some point, someone from your team will have to manually handle a portion of the process—again increasing room for error and creating delays. End-to-end software such as LendingFront speeds up your small business lending by applying technology to origination, underwriting, servicing, and collection. 

Interested in learning more about how to break down barriers to small business lending with loan origination, servicing, and management software? Explore more blog posts from LendingFront.