Many banks are quick to invest in areas of overt growth, but when it comes to small business lending, there’s often some hesitation to dive in—despite the opportunity for ROI. When you’re a regional bank or credit union, lending to small businesses can seem like an inefficient use of time, energy, and resources that could be spent serving bigger customers. But with advances in technology, it’s easy to reap the benefits of working with the small business market.
While banks tend to focus on juicy large business customers, small businesses are the cornerstone of the U.S. economy—employing 48% of the private sector workforce and creating almost two million new jobs annually. It doesn’t make economic sense for a bank to walk away from such a large market. And yet, so many do because they haven’t found an efficient lending solution. 60% of small business owners are seeking loans under $100,000—requests that are small, but could bring incremental revenue to your bank. With software to originate, underwrite, and service these applications, lenders now have the tools to profit from low-capital, low-risk requests instead of leaving idle cash on the table. Here’s how small business lending technology is creating a new growth area for regional banks and credit unions.
It’s smart business to lend to small businesses
Banks are apt to invest in consumer financial technologies or expand their support for large business clients. But when it comes to investing in technologies to facilitate small business lending, there’s been a dearth of options. Yet, it’s these small business owners that rely on capital loans to operate—such as when equipment breaks or their business plumbing needs to be replaced. Small businesses that seek financing are half as likely to receive it, compared with large businesses that have revenue greater than $10 million.
As with any loan—whether personal, commercial, or small business—you want assurance that your borrower can pay you back. Cloud-based lending technology reduces the administrative burdens of underwriting small business loans—and can help match the right loans and terms to each business.
If your bank or credit union has the capacity to provide small business funding, small business lending software can put this money to work.
Digitization: the key to capitalizing on small business loans
According to a recent survey by the American Banking Association, only 26% of banks are leveraging digital channels for small business lending. Advances in technology have forged a new reality where lending is no longer unprofitable. You can configure software to automatically approve or deny loans up to a pre-set limit without wasting an applicant’s time—or yours.
The benefits of small business lending software aren’t limited to underwriting. When you offer an online loan application process, small business customers are more inclined to do business with you versus your competitor down the street. You’ll attract more customers and vet them faster, providing a quick a ‘yes’ or ‘no’. And if the decision is ‘yes,’ you can deliver funding faster. You’ve now multiplied your bank’s business, maximized your ROI, and done it all without manual paperwork or time-consuming in-person meetings and calls.
For many regional banks and credit unions, small business loans are a growth opportunity waiting to happen. Digitizing your small business lending can help you optimize this vast market—and your ROI.