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5 Strategies Lenders Can Use for Loan Portfolio Growth During Slow Economic Cycles

Guest Author
Jun 1, 2021

Updated on May 24, 2023.

Will the U.S. economy enter another recession in the near future? 

The economy was moving along at a high rate of growth after the huge drop off in GDP because of the COVID-19 pandemic. The corresponding increases in inflation caused the government to react by increasing the Federal Funds Rate in the hopes of slowing inflation. This raising of rates slowed GDP growth but also increased the chances of putting the economy into a recession – resulting in challenges for banks and credit unions who had hopes of growing their commercial loan portfolios.

Here are five strategies to increase your personal loan portfolio in an unstable economy: 

1.    Develop lending specialties that cater to niche industries

Expand your service offerings to solutions that cater to specific needs, such as working capital finance, government-guaranteed finance, or lending to niche industries. 

Personal loan portfolio growth may require your lenders to study new industries or you to acquire new technologies that will support your strategy. Such efforts can pay significant dividends for years. 

The first step is to thoroughly examine your market for existing and emerging industry trends and opportunities.

2.    Study your consumer relationships more closely

Your lending officers are probably very familiar with your commercial client base. But are they as familiar with your consumer clients? 

There’s always an opportunity to reach out to these clients to learn more about their goals and ambitions. Of the more than 30 million small businesses in the U.S., about 24 million are non-employer firms – meaning they look a lot like consumers on paper but do not have a payroll. In fact, they have a very small business that is hoping to grow. 

Chances are, many are funding that business through personal savings and personal credit. 

Oftentimes, your branch personnel are the best informed to guide lenders to these potential opportunities. Until now, most of them have flown under the radar with many of these “consumer” accounts destined to become the small business relationships of the future.

3.    Widen your net for loan portfolio growth

Physically expand your market, either directly or through loan participations. 

One benefit of commercial lending technology is it has allowed lenders to monitor their commercial loan portfolios – regardless of distance. This is especially true for collateral and loan portfolio management systems. It’s also true regarding the use of third-party data sources that can arm you with business health scores daily. 

Many of these same technologies now allow you to grow your portfolio through loan participation networks. 

While economic expansion does not occur everywhere at the same rate, some regions may be growing steadily while others are struggling. If your region is not growing, participate with financial institutions that are in growth regions.

4.    Enhance your business retention efforts

Get closer to your existing commercial clients. 

Ensure you understand the challenges and opportunities your commercial clients are facing. At its core, commercial banking is about helping your clients face their own challenges. 

Retention visits to existing clients are always critical, especially when economic cycles are changing. And when those tough times hit – you need to make sure you’re spending your limited resources on the existing clients that are the most important. 

In addition to strengthening your relationships, retention visits also result in referrals that can further support your growth strategy.

5.    Expand your web presence and your social media efforts

This is no longer an option for community-based financial institutions. It’s necessary for survival. 

You should have dedicated marketing personnel in place – either as an employee or a consultant – to develop or refresh your comprehensive strategy, including social media. This involves posting regularly and utilizing subject matter experts to create content and nurture market awareness for your institution. You may also be able to leverage your vendors and their own social media strategies by re-distributing their content. 

The resulting brand awareness becomes critical in your effort to attract new clients.

While 2022 may not have been what any of us expected, these strategies can help you enhance both your personal loan portfolio growth and client retention and empower you to leverage your greatest strength as a community-centered financial institution – your own team of professionals.

Contact us to learn more about how you can compete effectively by offering helpful working capital solutions. 

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