7(a). 504. Working capital. Merchant cash advance. Professional practice. Franchise startup. Peer-to-peer. Microloan. Line of credit.
With more than 25 different types of loans, it’s tricky for small business owners to navigate the lending environment. Various restrictions complicate matters even further, leaving borrowers unsure if they’re getting the right loan to match their needs or the very best terms on the product from a lender. Not surprisingly, the 2015 Small Business Credit Survey revealed that 33 percent of borrowers using large banks and 22 percent of borrowers at small banks are dissatisfied at the lack of transparency surrounding the loan application process.
But traditional lenders can improve this situation. With a smartly designed online lending platform, lenders can provide small business borrowers exactly what they’re looking for in a fast, easy-to-understand way.
A robust online presence attracts young borrowers.
Most millennials reach for their smartphones or laptops for banking. They want the same convenience when conducting other financial business, like researching small business loans. Yet many bank websites fall short in helping borrowers educate themselves about the right loan product for their needs.
Digital marketplaces like Kabbage, LendingTree, and Prosper fill their websites with handy calculators, blogs and other online tools that answer potential borrowers’ questions about small business loans. Borrowers are then only clicks away from an online loan application, to which they can expect a reply within hours. Time-to-funding is rapid, too.
By partnering with a fintech platform to bring loan applications online, traditional lenders can accelerate and improve the loan application process — while still offering lower rates and more affordable pricing than those alternative lenders. A partnership between conventional lenders and high tech conveniently puts lending information at millennials’ fingertips — allowing them to choose how they interact with their bank. For instance, they can start their research online when they want to (whether it’s 1 PM or 4 AM). The application itself can be customized to guide borrowers to understand their needs and match them to the ideal loan product. Then, when a complex question arises, they can reach out to an actual person and receive that personalized service traditional financial institutions are known for.
Speed is in-demand.
According to Barlow Research, 36% of younger business owners want to apply for loans online – more than double the rate of business owners over age 65. That’s because digital applications are convenient and give access to capital in a timely fashion. Currently small- to medium-sized businesses wait an average of 3-6 days to receive a response from their bank, according to Barlow Research. It takes even longer to get a loan approval and funding. Often with little cash on hand, this wait time is unacceptable, putting businesses in the precarious position of not making payroll or being unable to pay their vendors on-time.
A fintech platform automates the loan process, making it both significantly less time-consuming and labor-intensive. An online application enables potential borrowers to see if they’re pre-qualified quickly before completing a full loan application. Once pre-approved, the digital application also educates business owners on what loans they qualify for. And instead of printing, photocopying, and faxing hundreds of pages of financial documents, applicants can quickly and securely upload them, moving further along in the origination process at a faster pace than the old manual way.
Combining high-touch with high-tech is a win-win.
When a financial institution uses a digital platform and big data to inform its loan decisions, customers receive a loan product that better suits their needs. Traditional lending models only take a few criteria into consideration when making a lending decision. But as we explained in the post, 4 Ways Machine Learning Makes Small Business Lending More Profitable, fintech platforms use numerous data points – both traditional and enhanced – to determine creditworthiness in a real-time, highly accurate manner. With this high-tech method, some borrowers that would have been rejected during a manual loan process might now be approved; others will qualify for loans with better terms.
By leveraging technology, loan officers’ jobs are also streamlined. No longer do they need to wade through piles of paperwork to determine a borrower’s creditworthiness. A fintech platform frees them up to focus on answering customers’ questions, building relationships, and creating a positive lending experience for the customer.
Join us for our free webinar series this month to learn more about trends in banking technology as well as how easy it can be to start making smarter, faster loans with a software solution.