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Commercial Lending

The Bank – Business Disconnect ... What is Your Application Process Saying to Borrowers?

Corey Jaeger
May 19, 2017


In today’s highly-connected, technological landscape, you probably think your financial institution is already providing everything that small business owners are looking for. Right? I mean, when you consider the incredible innovations in recent years, there can’t possibly still be gaps.

Well, the data is telling us otherwise.

A 2016 survey by Federal Reserve Banks pointed out several complaints small business owners have about borrowing from financial institutions:

  1. Lack of transparency
  2. Difficulty of application process
  3. Long wait time for credit decision

Dissatisfied commercial loan applicants site lack of transparancy and slow response

Source: Small Business Credit Survey, Federal Reserve Banks

How can transparency, process, and time still be major concerns for FIs after all the new technology they’ve installed?

While it’s true that consumers can manage their accounts on their computers, tablets, and phones, there is no real digital communication occurring today between business owners and financial institutions. These borrowers report being in the dark about where their loan applications are throughout the funding, which can leave customers feeling frustrated and sensing that the entire process is too complicated.

Another concern for financial institutions is alternative online lenders. These market disruptors have rapidly become major competition in the lending space. The top three non-bank fintech marketplace lenders originated nearly $12 billion in loans in 2015, up from less than a half a billion in 2011. And they’ve realized this rapid growth while charging more than traditional FIs.

Quick funding time and open communication are the main reasons borrowers are willing to pay extra for this type of financing.

By contrast, the application process at a traditional financial institution has typically been for a business owner to fill out a paper form or submit a PDF requesting more information and then wait 2-4 weeks for response, with no feedback in the meantime. Obviously, that will no longer do.

Financial institutions must adopt a new mindset, one keenly focused on providing what their commercial customers are looking for. A recent study indicates that fewer than 20% of financial institutions offer an end-to-end platform for business borrowers to apply for a loan online.

They can quickly turn things around by adding a digital lending platform to their banking technology.

The addition of a digital platform would give the FI the ability to offer a user-friendly online borrowing experience that addresses the three biggest complaints of business owners by:

  • Providing a checklist of all required documents needed for the application so the borrower knows what is required upfront.
  • Giving the borrower visibility into the loan cycle, so they know exactly where their loan request is in the approval process.
  • Dramatically reducing turnaround time on loan applications by allowing borrowers to upload their application and all supporting documents through a secure online portal.

This is the type of technology-enabled customer engagement that grows relationships for financial institutions.

Many financial institutions have told us that one of their key objectives in 2017 is to grow their small business portfolio. The surest way to do this is with a customer-centric online platform that provides borrowers with the communication and transparency they are demanding while expediting the funding process.

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