For community banks looking to evolve into a digital lending operation at scale, a comprehensive business credit platform can be the answer. This article will broadly explain business credit platforms and how community banks can implement a business credit platform. We also break down several use cases so community bank executives and credit officers will understand how a business credit platform can improve their existing banking operations.
In this article we:
- provide an overview of business credit platforms
- detail how community banks can use business credit platforms
- advise on how community banks can find a business credit platform
Overview of Business Credit Platforms
What exactly is a business credit platform and what does it help bankers do? A business credit platform is a comprehensive set of software solutions under one roof that provide end-to-end coverage for every essential workflow for running a credit and lending operation at scale. Think of all of your current financial products, their associated processes and workflows, credit investment management processes and workflows, coming together under one unified digital platform. That’s a credit platform. It allows your bank to expand credit strategies and serve customers on any device or in a physical branch, while maintaining risk standards and improving portfolio performance.
In addition, a business credit platform is further enhanced by an ecosystem of resources and integrations that are designed to be configured to your financial institution’s needs. Built-in integrations to trusted third-party data services make it even easier for bankers to access everything they need in one place. All of these capabilities make it possible for community banks to increase their direct lending activity without adding unnecessary or unexpected risk.
Before we dive into the specific ways community banks can use business credit platforms, let’s look at elements of the lending operation and how they can benefit from business credit platforms:
- Instant Decisions in Commercial Lending: Instant, real-time lending feedback to commercial clients. Hours of research and document analysis can be replaced by automated decision-making. This helps to get private credit into the hands of businesses faster. A faster process improves the customer experience and encourages further engagement by the client business. For additional information, review our article titled: The Role of Instant Decisioning in Commercial Lending.
- Automation in the Loan Application Process: Many steps in the loan application process can be automated. When you unpack the loan origination process, you will see how automation can drive more and better business for you. For additional information, review our article titled: Understanding the Benefits of Automation.
- Increase Loan Revenue: New customers and new loans do not always mean more revenue. Adding commercial loans to your portfolio also means additional costs for processing, loan origination, and servicing. Implementing a business credit platform is key to substantially increasing profitability for financial institutions. For additional information, review our article titled: 9 Ways to Increase Loan Revenue with a Digital Lending Platform. Since this article was written in 2021, we suggest you skip the first section and scroll down the section with the same name as the title of the article.
- Limiting Risk with Cash Analytics: Without software and automation in place to assist, banks might still be using applications like Microsoft Excel, Google Sheets, QuickBooks, and other accounting software packages to achieve adequate functionality in assessing loan candidates. Achieving scale and optimizing profitability in your loan portfolio is difficult doing it this manual way. For additional information, review our article titled: For Lenders, Cash Analytics Are Key to Limiting Risk.
- Artificial Intelligence in Lending: Artificial intelligence (AI)-based financial software can help make better credit decisions in the lending process, especially when it comes to determining eligibility for credit, default risk, and similar key metrics. For additional information, review our article titled: Understanding the Role of Artificial Intelligence in Lending.
- SBA Lending Platforms: Community banks need to provide U.S. Small Business Administration loans smoothly and digitally. For additional information, review our article titled: How Community Banks Are Using SBA Lending Platforms. Since this article was written in 2021, it has a lot of pandemic-related information at the beginning of the article. Although still helpful, we suggest you skip the first section and scroll down to the section titled, “The Future of SBA Lending is Digital”.
- Selecting and Rolling Out a Business Credit Platform: Selecting and rolling out a business credit platform are major initiatives that you need to get right. We have articles that cover both topics, please see Key Questions to Ask When Selecting a Business Loan Origination Solution and Six Things to Do Before Selecting a Business Banking Platform for inspiration and guidance.
In addition to the resources mentioned above, keep your eye on our blog. We regularly produce content that helps financial institutions be successful in business lending, including detailing business lending best practices and industry news.
Now, let’s dive into ways community banks can use a business credit platform to grow, expand, optimize, and scale their lending operation.
How Community Banks Can Use Business Credit Platforms
We provided a high-level definition of business credit platforms, and some inspirational examples of what’s possible, now let’s dive into some specific, tactical ways community banks can use business credit platforms:
1. Offer a full suite of credit products. A business credit platform will enable a community bank to expand its product offerings, digitize existing offerings, and bring the associated workflows under one roof to help optimize for preferred risk at scale. Offer a wide range of credit and business banking solutions all of which are configurable to the specific needs of your institution:
- Business Term Loans
- Small Business Administration Loans
- Lines of Credit
- Business Credit Cards
- Business Checking Accounts
- Trade Finance
- Commercial Real Estate Loans
2. Monitor credit portfolio of business loans. Once a loan is issued, a business credit platform can help you stay a step ahead of risky behaviors by continuously monitoring activity. By configuring the reporting metrics that matter, the credit team can have continuous real-time monitoring of borrower activity. As your AUM scales, your credit team will be able to keep up and maintain a healthy portfolio of risk.
3. Helping to originate new business loans. With credit analysis, cash flow monitoring, transaction-level analysis, and behavioral pattern detection tools, community banks will be able to identify patterns and calculate risk metrics on each credit file at scale. This can result in a loan portfolio of preferred credit risk, more informed credit decisions, faster credit decisions, and generally a better decision-making engine.
4. Setting up a credit policy that governs how to underwrite loans: Leverage machine learning to create a fully customizable credit scorecard that is configured to your unique policies. This can result in better-informed underwriting decisions, reduce risk, and introduce more preferable risk into the loan portfolio. Based on the bank's comfort level with automation, a business credit platform can be adjusted for how much automation the bank wants to use for lending decisions. For example, you can equip underwriters with insights and recommendations on each credit file to support their lending decisions. Or, the lending decisions can be entirely automated.
5. Pricing strategies for different loan products. A business credit platform can support a community bank’s needs with configurable pricing for different loan products. For term loans, you can use the platform to set your pricing, credit decision parameters, amortization schedules, rules, and conditions. As another example, the bank can issue revolving credit lines to business clients with configurable thresholds and configured repayment schedules. Additionally, if market cycles or unforeseen macroeconomic conditions impact credit markets and interest rates, you might need to adjust your pricing on term loans quickly; which can be accomplished using the business credit platform. For additional information on pricing strategies, see our additional articles titled: Business Loan Pricing Strategies for Banks When Rates are Rising and How to Create a Risk-Based Pricing Strategy for Business Loan Borrowers.
6. Provide better, automated customer service. Any manual steps in your current lending workflows can frustrate existing customers and would-be borrowers. Manual communication executed over email or phone detailing the progress you’re making throughout the lending timeline, which likely means your credit team is also manually pulling reports and information from a range of different systems, opens the door for human error and customer frustration. Today’s more savvy borrowers tend to ask more questions and demand more detail along the way. If being done manually, this takes your staff time to provide the level of education and person-to-person service today’s customers are seeking. A business credit platform provides your credit team with a single source of truth for any information a borrower is seeking quickly and easily.
7. The ecosystem around a credit platform keeps the bank on the cutting edge. A business credit platform can eliminate the need for a community bank to manually assemble its technology ecosystem to be effective at business lending. Integrate other financial tools into the platform for a single view to handle all our lending workflows. A bank can integrate existing technologies like cloud hosting, a customer information program, eSignature, final validation, financial & government data validation, or monitoring & risk assessment directly into a business credit platform. A community bank will be able to integrate its other financial systems from fintech into the platform without needing to code. All of the behind-the-scenes coding work to connect external systems to the platform via API has been done by the platform technology team and the connections work out of the box.
For community banks still manually working on lending workflows, this all might sound like it’s too good to be true. However, a community bank can truly usher in a new digital era using a platform. A business credit platform can help community banks expand their financial services and credit product line, streamline their processes, scale, and become more profitable. Transitioning to a digital future with the software backbone of a business credit profile can position a community bank and its existing experienced team for future growth and longevity.
A business credit platform can level the playing field for community banks. A platform can enable a community bank to expand its credit products and compete with larger, national banks that might be entering the market.
For example, with the platform, a community bank can participate in SBA-guaranteed loan programs. With direct integration to SBA systems, the bank can seamlessly transmit data for faster processing. e-sign integrations and workflows capture government declarations and client documentation up-front in an all-digital workflow. Having that technology backbone to support for every loan product is now possible for community banks.
How Can Community Banks Find a Business Credit Platform?
Biz2X is the platform chosen for business lending at banks and financial institutions around the world. Lenders choose our platform because they want to transform their business lending practices digitally in the most successful way possible. Our approach as a technology provider is different because we know business lending inside and out. Biz2X is built on the insights and expertise that came from a decade-plus of Biz2Credit’s lending experience. That’s why the platform works so well for lenders of all sizes.
We invite you to bring any questions you may have to Biz2X. Reach out to schedule a demo, drop us an email, or reach out to a platform specialist on our team to learn how Biz2X can boost your bank’s business lending IQ and help you make shrewder lending decisions more quickly and efficiently than you’ve ever made them in the past.