4 Steps Community Financial Institutions Can Take to Compete with Online Lenders

Posted by Craig Laures

Oct 25, 2017 7:30:00 AM

Just as each community is unique in stature, industry, economy, and opportunity, so is each community financial institution (FI). Regardless of our composition, the one thing we all have in common is a limitation of time.

Let’s agree to make the most of it.

Online lenders (also called alternative lenders) have recognized and seized the fact that time is limited. In response, they have created channels to significantly reduce the amount of time required to obtain another limited resource—money. These lenders are helping businesses get more of what they want: satisfying their need for more time to focus on their business and more money to execute their creative and industrial ideas.

Let’s face it: banks and credit unions today are faced with overwhelming, burdensome regulatory requirements to accept, process, and fund commercial loan applications.

Alternative lenders are not.

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Topics: Lending

Loan by Robot?

Posted by Jonathan Patrick

May 10, 2017 11:30:00 AM

Does “Robo-advice” Include Lending?

By now, financial services consumers have gotten used to the idea of a robot handling their money. In fact, according to Accenture, seven out of 10 consumers even welcome “robo-advice” for their banking, insurance, and retirement services.(1) So clearly, consumers are at least open to the notion of a robot handling their assets – but what about their liabilities? Are consumers ready for a loan processed entirely by a robot?

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Topics: Lending, Tomorrow's Technology

People, Process, Product: What if “the Profit” Paid a Visit to Your Bank?

Posted by Clarke Farmer

Dec 28, 2016 11:30:00 AM

One of my favorite TV shows is CNBC’s The Profit. In the show, Marcus Lemonis (aka “the Profit”) invests and partners with small businesses that typically need dramatic changes to their business model in order to improve performance and profitability.

The Profit’s method focuses on three primary elements: people, process, and product. It is quite entertaining. The people he gets involved with are usually even more interesting than the business challenges faced in each project. I suspect that any banker who has seen the show can nod their head and chuckle in agreement that many of their commercial loan customers fit a similar profile.

That said, do you wonder what the Profit would say if he paid a visit to a community bank? We may never know, but here are a few thoughts specific to the commercial lending side of the shop.

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Topics: Financial Services Industry, Lending

Stand Pat and Starve. Diversify and Thrive.

Posted by Mark Messick

Nov 16, 2016 11:15:00 AM

Because of the recent scrutiny over commercial real estate concentrations and lower-than-expected yields, financial institutions (FIs) have been searching for ways to grow loans and raise profitability. Unfortunately, aside from consumer and commercial and industrial (C&I) lending, lenders don’t see a lot of options. In fact, with the onset of poor performance in the consumer loan space, many FIs have chosen to make business lending a priority. And then a slowdown in the economy, uncertainty about our next president, and competition for the better credits led business lending volumes to fall for the first time in six years according to the Wall Street Journal.

So what’s the response?

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Topics: Lending

How Information Technology Helps Create Credit ACE’s Within Your Institution

Posted by Patrick True

Jul 20, 2016 10:54:08 AM

Years ago, I introduced the Credit ACE acronym to describe a credit officer’s skill in managing a commercial lending portfolio. To be an ACE means to Anticipate potential future events and actions, to Communicate effectively with your clients and to Enforce legal agreements appropriately. Since the acronym was first used, advances in information technology have widely enhanced those capabilities. By working with financial technology vendors, financial institutions across the US are beginning to aggregate their financial data in order to see more clearly into each business relationship. From on-line applications and underwriting through documentation, collateral management and compliance, these institutions are beginning to benefit from seamless delivery of data from one system to the next. This will pay further dividends in the near future as institutions develop their strategies to comply with new regulatory standards associated with FASB guidance regarding current expected credit losses (CECL).

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Topics: Loan Pricing, Lending

How To Create Commercial Customer Loyalty

Posted by Clarke Farmer

Mar 23, 2016 10:00:00 AM

How many battle-tested entrepreneurs still appreciate the lenders that helped them get started years ago? The good lenders are remembered and can enjoy customer loyalty for life. Let’s talk about how to make that happen more often for your lenders.

The most obvious variable affecting any lending relationship is the rate.  Since reducing the relationship to price is a death sentence to value, we won’t talk about price in this article. Rather, we will consider a few other fundamentals that can enhance loyalty when delivered properly.

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Topics: Customer Experience, Lending

The Recent Fed Tightening: How Much Will Banks Really Benefit?

Posted by Jon Kozlowski

Jan 27, 2016 10:00:00 AM

This past December 16th the Federal Reserve finally began unwinding its extraordinarily accommodative monetary policy and raised its benchmark Fed Funds rate. This was the first such rate increase since June 2006. Bankers’ enthusiasm for higher short-term rates is well-founded, but caveats abound.

The traditional view has long held that the banking industry as a whole is asset-sensitive, benefitting from rises in interest rates and being harmed by declining rates. Historically, financial institution share valuations are positively correlated with interest rates. This correlation stems from two sources:

  1. Rising rates generally coincide with periods of improving economic conditions, and improved credit conditions, while declining rates prevail in times of economic distress;
  2. Traditional commercial banks tend to have a positively-gapped balance sheet structure, owing largely to the preponderance of long-duration, stable core deposits in their funding composition.
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Topics: Financial Services Industry, Lending

What Are Your Keys To Successful Business Development in 2014?

Posted by Patrick True

Aug 31, 2015 1:48:53 PM

The world of financial services has changed in countless ways during the past twenty years.  As much as things have changed though, the true benefit of community based financial institutions is still their ability to connect to their local market.  While technology can help, the key to winning new business still lies with your most valuable asset – your employees.  You can have the best client management systems in the world and the best systems for serving those clients; but if your people are not skilled in uncovering new business opportunity, your organization will not sustain growth.

There are two ways to grow a business other than through acquisition; 1) Sell more services to existing clients, and 2) Develop new clients.  While your organization can grow with either of these, the best solution is to do accomplish both.  So how will you do it?

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Topics: Small Business Market, Lending

Four Small Business Lending Trends to Watch

Posted by Terry Renoux

Aug 28, 2015 4:28:36 PM

Terry Renoux Author: Terry Renoux, TRenoux@jackhenry.com

Lending activity across the U.S. is improving. Slowly … but improving nonetheless. Visits to partner banks in the western U.S. over the past couple of weeks indicate that businesses are becoming more optimistic about their ability to grow.

According to bank partners, the specific segments that are seeing growth are small manufacturers, transportation, and businesses with ties to the energy sector. The agriculture industry was also noted as a stronger segment right now due to the current condition of this year’s crop forecast. National surveys show that only 20 percent of bankers believe small business lending will stay the same in 2013 as compared to the last two years. An overwhelming majority, more than 60 percent, say they believe lending will improve; one-third of those lenders believe it will increase dramatically. Results from this same survey suggest that three out of four U.S. bankers are planning to aggressively pursue small business lending in the coming year.

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Topics: Small Business Market, Lending

Growth in Asset Based Lending Calls for a Return to Fundamentals..

Posted by Patrick True

Aug 5, 2015 1:30:25 PM

 Author: Pat True, RTrue@profitstars.com

According to the Commercial Finance Association’s annual survey, asset based lending (excluding factoring) commitments rose to $216 billion by the end of 2014, with funded balances reaching $90 billion.  This represents a 12.3% increase in funded balances from 2013.  Overall credit line utilization rose 41% for the year.  During a year that saw a return to commercial real estate lending for many, working capital lines were also clearly a factor.  This trend was recognized by regulators as the OCC distributed new guidance for management of asset based lines, recognizing that banks are doing more in this arena.  Times like these call for a return to the fundamentals of working capital finance.  Among these are the five keys to depending on accounts receivable as a repayment source:

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Topics: Lending

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