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Not All Lines of Credit Are Created Equal

Posted by Patrick True

Apr 21, 2017 11:00:00 AM

Revolving lines of credit to small businesses help fulfill a critical need for cash flow. They bridge the gap between the time services are completed or goods are shipped and the time payment is made for the resulting invoices. For most small business owners, this time gap can be challenging, especially since it is unpredictable and can leave the business at the mercy of its customers. For small businesses in the U.S., this time gap averages 50 days, although it varies by industry. Filling the gap with predictable cash flow is a critical requirement for businesses that are growing, as well as businesses that have opportunities for quick-pay and volume discounts.

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Topics: Commercial Lending

The 20th Anniversary of “The Five Keys to Accounts Receivable Financing”

Posted by Patrick True

Apr 7, 2017 11:00:00 AM

Twenty years have passed since Paul Sims and I published an article in the Journal of Lending and Credit Risk Management (now the RMA Journal) entitled “The Five Keys to Depending on Accounts Receivable as a Repayment Source.” It is hard to describe the amount of change we have seen in financial services during those 20 years, and the challenges institutions have faced. While almost everything about the commercial lending process has changed since 1997, from technology to borrower/lender communication, the five keys are still just as relevant today as ever.

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Topics: Commercial Lending

FinTech “Space Race” to Build a Fully-Integrated Commercial Lending Platform

Posted by Terry Renoux

Mar 24, 2017 11:00:00 AM

 

Conditions within the commercial lending sector during the past ten years have led financial institutions to seek greater efficiency throughout the loan fulfillment process. The demand for more integrated lending platforms is produced by three distinct market conditions:

  1. The rise of alternative third-party lenders since 2010.
  2. The need to increase production speed and reduce costs, in part due to the competitive pressures created by the new alternative lenders along with historically low net interest margins.
  3. The need for data integration to allow previously disparate systems to communicate with each other.

This third item, data integration, will make it much easier for institutions to manage risk and comply with upcoming changes to the loan loss recognition standards put forth by FASB.

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Topics: Commercial Lending

Develop a Strategy to Nurture Your Small Business Loan Declines

Posted by Charles McGeehan II

Mar 10, 2017 11:00:00 AM

Small business lending is poised for an interesting year in 2017. Small business confidence scores are riding on a 10-year high. Alternative lenders, including online, marketplace, and peer-to-peer, are becoming more active. Regulators are determining how the new “special purpose” charters will be structured. Now is the time for your institution to determine a strategy for living in a market that will likely see many more commercial credit applications. While this plan includes the loans you approve, it must also address how you will handle loan declines.

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Topics: Commercial Lending

It's Time to Meet Businesses Where They Live ... Online

Posted by Bill Roen

Feb 24, 2017 11:00:00 AM

In 2015, 20% of small business credit applications were generated through online lenders. This number is staggering when you consider that the market for online business loans was virtually non-existent just 10 years ago. This rate of growth is similar to what we have seen in the mortgage lending sector. In 2015, 23% of mortgages were originated online, up from 4% in 2005.*

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Topics: Commercial Lending

“The Long and Winding Road” of Commercial Lending

Posted by Kristin Zell

Feb 10, 2017 11:00:00 AM

When Paul McCartney wrote the lyrics to “The Long and Winding Road” in late 1968, it’s safe to say he was not talking about commercial lending. But he very well could have been. Many business owners can relate to the lyrics, especially the line “you left me standing here a long, long time ago.” There are no less than a dozen steps associated with application, analysis, underwriting, approval, and eventual funding of a commercial loan. That leaves a lot of room for process improvement. 

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Topics: Commercial Lending

CECL Requirements…Our Modern-Day Y2K?

Posted by Gary Lewis

Jan 27, 2017 11:00:00 AM

Flash back to the late 90s when Y2K was all the rage. I remember the panic that transcended virtually all segments of the software market. Will our interest calculate correctly? How will we track maturities? Will the coffee maker work? The sky was falling! Whoever thought that having a two-digit data field representing the calendar year would be such a big deal? Well, it was a big deal. Or at least it appeared to be at the time.

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Topics: Commercial Lending

The Five Most Meaningful Impacts of Lending Efficiency

Posted by Patrick True

Jan 13, 2017 1:00:00 PM

Since 2010, competition for commercial loans has increased significantly. More lenders have been chasing a limited number of loans during a slow growth environment. Alternative lenders of every shape and size have crowded the space, especially for small-dollar loans. More importantly, technology has shifted, resulting in greater pressure to meet the client online and to speed up loan approvals and turnaround times. Loans that previously would have taken two to three weeks from application through funding now take only a few days, or less. It reminds me of something Bill Gates once said - 

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Topics: Commercial Lending

Why Financial Institutions Shouldn't Ignore Marketing Lenders

Posted by Susan Griffin

Dec 30, 2016 9:15:00 AM

The following is an excerpt from Susan Griffin’s full article.

Traditional financial institutions (FIs) such as banks and credit unions have been challenged by new entrants into the lending market from as far back as the early 1900s when finance companies, like Household Finance, introduced an alternative way for consumers to borrow money. Fast-forward a hundred years, and FIs are still faced with “disruptors” looking to serve the consumer and business markets by fundamentally changing the way borrowers seek out and apply for loans. Whether you call them “fintechs” or “marketplace lenders,” they are making their mark on traditional lending.

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Topics: Commercial Lending

Ditch the Map!…Navigating a Changing Portfolio

Posted by Ken Summar

Dec 16, 2016 9:15:00 AM

 

In discussing strategic objectives with financial institutions across the United States, a common theme that I hear from CEOs and Chief Credit Officers is the need to diversify their loan portfolios so they aren't so concentrated in commercial real estate. And a common solution they are considering is to increase commercial and industrial (C&I) lending. 

What is that old saying? …“Easy to say. Hard to do.” 

Why is diversifying your loan portfolio difficult? Is it because businesses in your area don’t need working capital financing to help them thrive and create employment? I doubt that. 

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Topics: Commercial Lending

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