Small business lending can be a time-intensive and laborious process—for banks and small business customers alike. Small businesses have limited manpower, and it can be difficult for them to assemble the extensive paperwork required to apply for a business loan. And community banks and lenders spend just as much time processing these applications as they would for a larger loan request with a higher profit margin, whether the decision is a ‘yes’ or ‘no.’ 

The typical (i.e., commercial) lending experience is hampered by extended time frames, in-person visits, and massive stacks of paperwork to process. While a small business owner may be disappointed to learn their loan application has been rejected, it can be even more disheartening for them to wait for weeks on end with no answer. 

A ‘no’ delivered quickly may be a welcome response in a small business owner’s eyes. Let’s dive into why a faster ‘no’ is better than a slower ‘no,’ and how you can deliver a decision sooner. 

The impact of a faster ‘no’ on small businesses

Small business owners take an average of 24 hours to research lenders and initiate the application process. When small business owners seek additional funding, it’s often due to an unexpected emergency cost—and they need capital quickly

Waiting for a response from a bank can be agonizing when this capital is needed to facilitate a repair or replacement that helps owners resume business as usual. And small business owners would rather hear that their application was rejected sooner than later, so they can move on and apply for a loan elsewhere. 

From a small business owner’s perspective, it’s even more helpful to receive guidance alongside their rejection. Was the application turned down because of a poor credit score? Was the requested loan amount too high? Is the business plan weak? This can help borrowers better prepare to apply for loans in the future. 

Slow wait times lead to lost dollars 

In 2018, only 11% of community banks offered online small business loan applications. A digital loan origination channel can take 24 hours or less to process and approve or reject applications, but a manual application can take weeks. Loan origination officers only have so many hours in the day—and every new application they receive can push others to the bottom of the stack.

These slow wait times don’t just affect the entrepreneurs who apply for loans; they cut into banks’ profits. The longer it takes to process an application—whether it’s a ‘yes’ or ‘no’ decision—the less profitability your overall lending strategy may be. The solution? Increase the efficiency of your small business loan process by leveraging technology. If you can process applications more swiftly, you can deliver decisions to small business customers faster—and fulfill more applications.