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Efficiency, Flexibility and Responsiveness Are Key to Successful SMB Lending

7 Sep 2021
John Forrester

As we wait for life to get back to normal once the pandemic ends, navigating continued uncertainty in the meantime, one thing is clear: there will be a “new normal” shaped by the global health crisis.

According to BDO’s 2021 Financial Services Digital Transformation Survey, the impacts of COVID-19 are changing customer behavior and redefining business for the long term. Small and medium businesses (SMBs) are actively looking for access to capital and discovering that they have more options than ever.

SMB lending will revolve around three critical capabilities — efficiency, flexibility, and responsiveness — as this landscape quickly evolves. Here’s how lenders can create capacity in these areas and thrive in a post-pandemic world with lending automation.

Efficient SMB lending processes attract talent and increase revenue

Not long ago, when SMB lenders wanted to scale their businesses, they simply hired more loan originators and underwriters. Recruiting those professionals is more challenging than it once was, however, and talented lenders want the opportunity to fund more loans. To attract them, lenders will have to make the SMB lending process more efficient.

One way lenders can accomplish this is by automating rote processes that would otherwise hamper originators’ ability to efficiently fund loans. In doing so, they can eliminate the need for document chasing and back-and-forth email requests. Lending automation tools streamline these processes, helping originators to make faster and more accurate SMB lending decisions.

With automated lending processes in place, originators can manage more opportunities in less time and dedicate their expertise toward revenue-generating activities. For their part, lenders will be better positioned to recruit and retain the right talent necessary to scale their businesses.

Flexibility improves risk management and decision-making

Lenders can no longer rely on the traditional models for determining a business’s level of risk or overall creditworthiness. As disruption from the global health crisis continues to play out, lenders cannot view the performance from before and during the pandemic and use those data points as accurate indicators of a company’s ability to pay.

For this reason, it’s essential to have access to analytics that show a customer’s business cash flow and reveal contextual information, like industry and regional conditions, that may impact future performance. Digital lending tools that leverage bank statements to assess cash flow trends and credit risk can provide timely and precise insights, helping lenders manage risk and confidently issue loans amid the uncertainty of the pandemic.

Responsiveness wins business and boosts competitiveness

Time is of the essence when it comes to securing a loan. Generally, when a small business needs capital, the need is immediate. If the company doesn’t already have a good relationship with a trusted lender, it will reach out to multiple lenders. This is true for a broker seeking a loan on a business’s behalf, as well.

Lending automation solution – how the first unconditional “yes” will win the opportunity.

Consumer lenders that are not able to quickly respond may lose out to competitors. This is likely why, according to the BDO report, 24% of the financial institutions surveyed are making organizational changes to increase agility so that they can stave off increased competition.

ROI Graphic 1.3 4

SMB lending now requires quickly evaluating an applicant’s financial situation and making a decision to fund without “subject to review” conditions that the borrower may not find appealing, especially when there are other lenders ready to move forward under more favorable terms. Without the right insights at their fingertips, however, lenders cannot make the timely decisions needed to effectively compete.

A lending automation solution can provide the accurate analysis that lenders require in these cases, making sense of data with cash flow analytics and multi-source verifications. This way, lenders can quickly evaluate a prospective borrower’s risk, determine loan pricing accordingly, and issue an offer.

SMB lending requires efficiency, flexibility, and responsiveness

Borrowers are looking for capital, and they have more options for quickly securing loans than ever before. To remain competitive in this new environment, lenders must improve their efficiency, flexibility, and responsiveness. For example, Ocrolus is an underlying platform that helps industry professionals make sense of data with industry-specific small business analytics to optimize decision-making.

Efficiency, flexibility, and responsiveness are crucial capabilities that can create opportunities for SMB lenders to attract the right talent, confidently manage risk, and win more business. Consumer lenders that build this capacity now will find themselves well-positioned to succeed and thrive well into our post-pandemic future and beyond.