It’s 2020—and it’s a great time to be a bank. Management consulting firm McKinsey reports that global financial-services revenue has grown by 4% each year over the last decade. But this growth isn’t simply due to business as usual. The most successful institutions are adapting to an ever-changing landscape to drive convenience for small business customers—and increase growth for the banks themselves.
There are many ways for banks to drive growth in the coming year—and most of them revolve around technology. Research firm Forrester found in its The State Of Digital Banking, 2018 report that 73% of U.S. adults actively bank online, and only 43% of adults visit banking branches. A large segment of these digital-focused customers are small business owners—and yet, many banks aren’t capitalizing on small business lending, leaving money on the table. Here’s how small business lending fits into your 2020 growth strategy.
Building a strong bank
With the recession firmly behind us, the past decade has generally been very good for banks—including steady growth for community banks and credit unions. But many small banks have yet to reach their full earning potential by lending to small businesses as well as large ones. With today’s advances in financial services technology, there are ample new opportunities to strengthen your bank (and increase profits).
One of the biggest and best ways to grow your bank’s assets is to expand your loan audience—and small business lending presents a remarkable opportunity. Small business lending can seem costly or time-consuming—but this market segment is filled with untapped potential for a solid return on investment. Nearly 99% of companies in America qualify as small businesses, meaning banks that don’t lend to small businesses and entrepreneurs are missing out on a huge segment of the market. The question is how to make these loans—and the process to underwrite and service them—more profitable for you.
The small business dilemma
Most banking customers—and especially small business owners—don’t just want convenience, they need it. A majority of these customers don’t have the time to visit a branch, or have the resources to leave their businesses unattended. Yet, some banks still adhere to an outdated model: they only work with small business borrowers in person.
A personal touch sounds terrific in theory, but the reality for a business owner is that any time spent in a bank takes away valuable time to meet with their own customers and run their businesses successfully. Moreover, the process to compile all required paperwork for a small business credit application can be cumbersome and a huge drain on time.
Here’s where technology comes in. You need vital information like a business owner’s financial track record, income tax statements, credit score, and business model to know if they’re the right fit for a loan. Technology that automates the processes of obtaining and vetting this information not only saves your lending advisors’ time, it also opens up a whole new revenue base.
Better technology = deeper small business relationships
Your bank is already using automation to great effect for personal banking. This same safe, secure, efficient premise is now being applied to small business loan technology to help independent banks grow. Companies like LendingFront work with you to implement and configure a solution that fits your workflow and desired outcomes. Once your digital lending platform is running smoothly, you can start serving more small business customers than ever before, thanks to a few important factors:
- You can automate many burdensome processes like pre-approval and notification on small loans.
- Approval or deny decisions are made quickly. Faster service improves loan officers’ productivity and efficiency.
- You fulfill more small business loan requests—and quickly begin to reap the returns on your investment.
- With the majority of your small business lending process automated, your loan officers have more time to interact with commercial loan prospects.
- It’s no longer a case of either/or—now, you can profitably satisfy the needs of all business borrowers, both big and small.
Digitizing the small business lending process makes granting a loan less time-consuming and more profitable for you—and supports small businesses and local entrepreneurs along the way.
Partner with small businesses to grow yours
There’s a massive—and profitable—market just outside your doors. Small business loans are a business opportunity that community banks and credit unions can at last efficiently capitalize on. Streamline the path to small business lending with LendingFront: an end-to-end digitized solution that helps lenders originate, underwrite, and service small business loans.
Help your bank generate more profits from small businesses this year. Try a free demo of LendingFront today.