In today's dynamic financial landscape, most banks and credit unions struggle to fully tap into the small business lending market. At Rapid Finance we understand the unique challenges and opportunities associated with small business lending because we have been using technology to excel at lending since 2005. We have identified five key strategies that you can use to transform your institution and unlock the full potential of your small business lending portfolio:
- Sharpen Your Focus
It's no longer enough to be a "one-size-fits-all" lender. Make sure your internal goals and focus are streamlined based on the borrower and lending processes. This allows you to tailor loan products, collateral requirements and decision-making processes to the specific needs of these borrowers.
- Embrace Technology
Invest in a robust loan origination system (LOS) that streamlines the application process for both borrowers and lenders. Automation, online applications, and real-time status updates will significantly improve efficiency and expedite loan approvals.
- Build Relationships, Not Just Lending Portfolios
Small businesses are more than just numbers on a spreadsheet. Foster strong relationships with your borrowers and provide mentorship and financial guidance to help them succeed in the long-term. This not only strengthens loyalty but also mitigates your portfolio risk and opens up to cross-sell opportunities.
- Leverage Data-Driven Decisions
Move beyond traditional and cumbersome credit assessments. Utilize alternative data sources and analytics to assess a borrower's true potential. This allows you to identify promising ventures that might fall outside the parameters of conventional risk assessment.
- Champion Innovation
Small businesses are often at the forefront of innovation, and by partnering with them you open up new opportunities for your financial institution. Consider offering specialized loan products for startups, venture capital access or innovative financing solutions.
By implementing these strategies, you can position your bank or credit union as the go-to financial partner for small businesses. You'll not only contribute to the success of these ventures, but also unlock a wealth of new lending opportunities and fuel the growth of your own institution.