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How a Blend of Human and Digital Lets “You be You” and Win More Business Loans

Corey Metschke
Sep 14, 2023

Borrowing is a lifeline for many small businesses – enabling them to grow, invest in equipment, hire employees, and manage cash flow.

Small businesses are the backbone of many industries and communities, but recent data shows they face significant financial challenges. According to the Federal Reserve Banks’ Small Business Credit Survey, a staggering 59% of small businesses reported being in fair or poor financial condition.[1]

Small business financial health is not just important to owners and their employees, but also to the bottom line of the banks and credit unions that serve them.

Healthy businesses are better borrowers and spenders. When businesses survive long enough to thrive, they grow to use more banking and payments products. Furthermore, when businesses succeed, this generally means owners are more attractive personal banking accountholders as well.

As small business owners increasingly turn to digital banking solutions that offer more than just basic transactional functionality, blending both a humanized and digital approach is a differentiation opportunity for you.

By blending both the digital side of banking and the personalized service you’re known for, you can establish yourself as a trusted advisor – leading to greater accountholder loyalty, satisfaction, retention, and cross-selling opportunities.[2]

Meanwhile, the high interest rate environment has caused a slow-down with fintech and neobank lenders due to capital constraints. Now is the time for you to retool and accelerate your digital lending experiences to reach the small and medium-sized business (SMB) market.

Unlike most fintechs and neobanks, you know the markets your SMBs serve and can use that knowledge to mitigate credit risk and offer more attractive financing to SMBs – empowering you to reclaim lost market share over the last five years.

A True Competitive Advantage

There is no dispute that doing business in person will always provide greater value. It’s part of the human experience.

But banks and credit unions can no longer afford to remain in the traditional, status quo relationship model that relies mostly on in-branch, relationship-based service in today’s digital society.

After all, we’re all consumers first – no matter our trade.

The same is true for SMB owners.

Your path to success? Replicate what SMB owners want. Do they want to come to your branch to complete an application and drop off their prerequisite financial information? Would they prefer to research online, apply through their device, upload their documents, and electronically sign the agreements? Or is it a blend of both?

According to the 2023 Jack Henry™ Strategic Priorities Benchmark Study, 45% of financial institutions are prioritizing the development of a digital loan origination application as their top strategic objective in 2023.

With downward pressure on retail revenues, SMBs are also a key priority – with 65% of banks and credit unions indicating plans to expand SMB services.[3]

As a lender, you need to deliver a true digital loan origination experience to attract more loan applicants, originate more profitable loans, and speed up your process to provide better service and lower costs. A faster migration to digital can help you better cater to businesses while protecting margins on digital lending products. Decisions on individual loan applications can be made in a matter of minutes, significantly impacting your bottom line. For example:

In a recent podcast interview with CU 2.0, Dennis Janikowski, Senior Vice President of Lending at Potlatch Federal Credit Union and SMB lender who targets the up-and-coming small business entities, said:

“A $5,000 small business loan request may not be a profitable transaction that any financial institution wants to focus on. However, it’s a responsibility for financial institutions to provide to their communities. Lending technology also provides a way to handle these smaller transactions more efficiently and partner with the SMBs as that seed grows into a more profitable, long-term relationship. Part of the equation includes greater innovation to automate the decisioning process in determining the capacity of a small business to service a business loan payment.”

Banks and credit unions have a natural reluctance to fully automate credit decisions. While lending and the five Cs of credit have always been an art, there’s a need to maintain the human element of decision-making.

The perfect blend lies somewhere in the middle.

It’s important to bring some automation to the art and some art to the automation. Eliminating mundane processes and maintaining human touchpoints can help you make the right credit decisions and compete effectively in an overly crowded market.

Focus on process, not product. It lets you continue to be you, especially when it comes to SMB lending.

[1] Kiah Treece. Small Business Loans Statistics And Trends 2023, Forbes, accessed August 24, 2023.

[2] Ian Benton. Business Financial Health: A Foundation for Upgrading Digital Banking, javelin, accessed August 24, 2023.

[3] 2023 Strategic Priorities Benchmark Study, Jack Henry, accessed August 24, 2023.

[4] How banks can reimagine lending to small and medium-sized enterprises, McKinsey & Company, accessed August 24, 2023.

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