Small business lending has traditionally been ignored by many larger financial institutions. So the Small Business Lending Index by Biz2Credit showed an interesting picture. www.biz2credit.com
September, 2016 small business loan approvals for institutional lenders and big banks were at a high for the year. For the same period, small business loan approvals declined for small banks and credit unions; institutions we have always assumed to be more heavily invested in small business lending.
There are many reasons why this shift has occurred. Larger institutions can process loans more quickly and efficiently than many smaller institutions. Some financial institutions have held off pushing for loan growth in anticipation of a rate hike that never came. As year-end approaches, these banks are scrambling to make their loan origination goals, thus showing higher approval numbers.
We can see the demand remains for small business loans. What can you do as a regional or community financial institution to bring those loan requests in and process them as efficiently and quickly as the larger players?
- Invest in useful technology. Still using paper applications? Use AppGen to gather application information and financial statements quickly and easily.
- Get efficient. Evaluate your processes and procedures from application to booking. Drop the adage “we have always done it this way.”
- Small business lending is not commercial lending. Your analysis, financial requirements, and products should reflect the needs of small business lending, which is very different that of commercial lending.
- Don’t try to be all things to all customers. Small business lending gains its efficiency and speed from centralization and standardization. Certain loan and client structures fit small business, others do not. Do not try to drive highly specialized lending into the small business area. It will slow the efficiency of the entire segment.
- Make small business loans a goal. Having a commercial loan goal is not good enough. Each originator needs a small business goal focused on loans and/or deposits for that segment.
The market needs good small business lending. Regional and community financial institutions have the ability to make these loans happen. Don’t leave this segment for the big banks. Get your share!!!