According to the FDIC, community banks play a vital role in the functioning of the U.S financial system and the broader economy. Serving small businesses is one of the most important ways that community banks deliver value, from offering small business lending to providing critical banking services to these clients. Community banks’ strength is their ability to meet the needs of their local customers to help the community thrive.

Delivering capital to business clients is one of a community bank’s most important services. So how can a business lending platform fit into the picture for bank executives at these institutions? Let’s find out.

Business lending platforms and community banks

A recent FDIC Community Banking Study revealed that community banks that boasted higher ratios of loans to assets, more growth, and better performance were more likely to have adopted new technologies to serve their communities.

Choosing the right lending software can increase the performance of a financial institution’s lending solutions, such as small business loans, commercial lending, and lines of credit. It can also build engagement and solidify customer relationships. This is why the decision of what lending platform to select is so important for bankers to get right.

The top 5 features for business lending platforms a community bank must have

To cut through the noise of the numerous lending platforms available, here are the five must-have features that community banks need in a digital lending solution.

A great digital lending User Experience (UX)

More than any other feature in a bank lending platform, lenders must ensure borrowers’ experiences are so easy and attractive (yes, aesthetically attractive with good design and all) that they’ll return again and again when a cash flow crisis or other financial event occurs in their business. Your community bank may have the exact loan products borrowers need, but no one will know without a streamlined, eye-pleasing lending solution.

Small business owners and most other borrowers don’t have time to navigate a convoluted lending process. Understanding everything from onboarding information to loan offers easily is crucial to creating a good customer experience and building customer trust. A confusing loan application housed in a complex design can inhibit the easy flow of information and send borrowers to another financial institution.

A great customer service experience starts with attractive, easy functionality and ends with the borrower knowing the lender understands their needs.

Back-end lender dashboard

That said, the banker’s experience using the lending platform is equally as critical as the borrower’s. Without easy-to-use customer communication tools and the capability to navigate and organize data end-to-end, lenders can become the roadblocks to their own bank’s profitability. Loan originations will take a hit if the bankers working on small business loans aren’t properly equipped.

When the lender accesses a customer record, the dashboard should allow complete accessibility and understanding of the borrower’s journey. It enables the banker to service all of the customer’s needs confidently. Whether the lender needs to create automated financial reports, access crucial data, or look for possible growth opportunities, the lender dashboard is the window to the data required to make intelligent decisions.

Beyond the loan process, the right business lending platform provides valuable data collection and analytics for an increased understanding of borrowers’ spending and payment habits. With so much information at their fingertips, financial institutions can offer personalized advice and generate new revenue streams by providing relevant financial products.

SBA lending capabilities

In fiscal year 2021, the Small Business Administration’s (SBA) 7(a) and 504 loan programs provided more than 61,000 loans, reaching $44.8 billion in funding to small businesses.

The SBA provides an exceptional opportunity for community bank lenders to expand their small business lending products and offer the top-of-the-line business loan option to more of their clients. But SBA lending is difficult to automate and not every bank has the tools to make more SBA loans. Although SBA has extensive loan application requirements, digital solutions with SBA loan underwriting capabilities make the lending process quicker and less painful for all involved. The best fintech solutions provide purpose-built platforms using the newest cloud architecture and include a pivotal integration to the SBA E-Tran system.

During the rush for pandemic financial services, community banks using automation (digital lending platforms) were better able to manage the unprecedented volume of loan applications received in response to the SBA’s Paycheck Protection Program. Business owners often switched banks because of the ease of applying at a bank that offered the loans online. This is one reason why many community banks are now considering an SBA lending option a must-have in their digital lending solutions.

Loan Portfolio Reporting

While shareholders and regulators require accurate and timely portfolio reporting, internally, bank managers and lenders use customer portfolios regularly to identify growth opportunities and risk issues. Banks inherently generate a massive amount of loan portfolio data; therefore, it takes a robust business lending platform to help organize and analyze the information. And you should make sure the lending platform can go beyond presenting basic portfolio information.

Experts advise valuable portfolio management should help lenders:

  • Focus on causes, not just outcomes. For example, the portfolio should identify delinquencies and nonperforming loans and point to the lending rules that caused these issues.
  • Adapt in real time. Banks may develop good workflow and portfolio reporting systems but fail to adapt their lending practices to reflect their increasingly complex customer base.
  • Use smarter benchmarks. Traditional portfolio reporting often provides only current measures and fails to consider historical trends and variations. Good portfolio reporting should help lenders highlight trends in credit, portfolio composition, and any other changes in risk factors.
  • Interpret loan performance. Finally, portfolio reporting should provide numbers, analysis, interpretation, and recommendations. These recommendations are necessary so bank management can address problems head-on.
  • Credit Decisions and Underwriting Tools

The key features in any business lending platform are the tools that make loan automation quicker and more streamlined. From onboarding and throughout the loan process, the system should eliminate human error in credit decisions, accomplish reliable loan approvals, and lessen credit decision risk with innovative scoring models.

Lending software should provide the tools to assess the applicant’s creditworthiness by promptly gathering pertinent information from credit bureaus. Underwriting tools should then integrate the data with other applicant information (company data, financials, current liabilities, and debts) to give lenders a comprehensive view of the borrower’s credit health.  

Lending Software Solutions for Community Banks

Fintech lending platforms make it possible for community banks to level the playing field with larger banks and increase their loan approvals. With the right features, lenders can streamline operations, control risk management, and amass crucial data to better serve their customers and their communities. Learn more about one such offering by checking out Biz2X and the capabilities that our platform provides to community banks.