Build, Buy, or Configure – What’s the best business lending system implementation strategy?

Amid the rapidly digitizing environment of small business lending, community banks face a crucial decision that potentially determines their success over the next decade: how will they adopt the most suitable business lending system? The US digital lending market is expected to grow at a 13.10% CAGR from 2025 to 2030, reaching over $560 billion by the end of the period. 

The choice between developing a system in-house, purchasing a ready-made solution, or configuring an available platform to suit target goals is not limited only to IT. It requires strategic planning that considers every outcome, including compliance, customer experience, go-to-market strategy, and future scalability. Regional banks are finally and adopting exploring avenues to strengthen these capabilities and compete with digital-native lenders. Let’s dissect the future strategic merits and drawbacks of the choices regional banks make today.

5 Impact Areas of The Right Business Lending System

A business lending system is the backbone of loan origination, underwriting, risk assessment, documentation, monitoring, servicing, and collections. It’s not just a technology investment; it’s a digital extension of a financial institution’s infrastructure. By choosing the right digital lending platform, your organization will unlock multiple benefits, including:

• Faster loan approvals help increase loan volumes while reducing risk.
• Compliance automation helps sustain the brand’s reputation and prevents unwarranted penalties from regulatory bodies.
• Real-time analytics and reporting collectively empower business intelligence, minimizing exposure to risks and fraud.
• Flawless borrower journeys lead to higher loan application completion rates and enhanced customer retention.
• Operational efficiency streamlines the allocation of cost, labor, and bandwidth among loan officers, risk managers, and underwriters.

To leverage these benefits, banks and credit unions must strengthen their decision-making capabilities while implementing the business lending system. It involves not only the right vendor partnership but also the correct method for implementing it across the organization, considering both short-term and long-term ROI.

The 3 Ways of Implementing a Business Lending System

Implementing a business lending system or a digital lending software requires a thorough evaluation of its usability today and in the future. To do that, regional banks and credit unions should consider creating a checklist similar to the one mentioned below:

Once you have your requirements ready, it will help gain clarity on which method suits your financial institution the best: Build, buy, or configure.

1. Build In-House with Full Control

Building a digital lending system in-house requires setting up the entire team, infrastructure, and budgets for development, design, Q/A testing, and deployment. It also demands an in-house maintenance and support team for future upgrades or resolving technical glitches.

Advantages

• Intellectual property ownership and accountability of the project, code, and data.
• Software is fully tailored to your workflows, compliance needs, and risk policies.
• Minimal dependency on external technology vendors.

Disadvantages

• Demands a high go-to-market timeline of up to 36 months
• Project success relies heavily on the quality of the resources hired for the project.
• High upfront investment costs without a guarantee of successful implementation
• Risk of scope creep, which can cause delays, additional expenses, and resource exhaustion

Ideal For

Constructing a business lending platform would be suitable for banks with substantial IT budgets and well-staffed tech teams, particularly those banks aiming to develop in-house risk models or digital intangible assets. It is perfectly suited to organizations that aim to present an in-house digital lending ecosystem as a long-term differentiator. It is also ideal for banks that are part of a larger or multi-national conglomerate, where the same software can be used as a white-label solution at other financial institutions.

2. Buy a Ready-Made Product

This is the most straightforward way of implementing a business lending system. It involves purchasing a ready-to-deploy product without requiring investment in coding or configuration. A ready-made digital lending platform can be purchased as an on-premise solution or subscribed.

Advantages

• Fast deployment in up to 120 days
• The lending solution can be tested for efficiency through a subscription before investing significantly
• The readymade nature assures upfront of meeting the offered scope of work and expectations
• The provider offers regular maintenance updates, security patches, and compliance upgrades

Disadvantages

• Limited scope of customization or configuring workflows to your lending process
• Scalability is directly proportional to the cost of the product subscription or on-premise upgrades
• May include product features and functionalities that are irrelevant to your unique needs
• Data storage and integrity rely heavily on the security protocols of the provider

Ideal For

This strategy suits banks that need to rapidly digitize without incurring the expense of intensive internal resource utilization. It suits the needs of commercial lending fintechs that want to implement a safe and compliant business lending system without creating one themselves. A company that focuses on time-to-market and speed will experience maximum profitability from this approach.

3. Configure to Your Unique Loan Process

Configuring a business lending system is a hybrid approach of buying and building. It involves selecting the right partner equipped with the resources, technologies, integrations, and niche expertise.

Advantages

• Maximum control over the outcomes of the implementation partnership from commencement to deployment
• Lower cost of ownership than building and higher customization than a ready-made product
• Ready base infrastructure built on microservice architectures allows rapid end-to-end configuration after deployment through drag-and-drop functionalities
• The cloud-first nature of a configurable business lending system allows for on-demand scalability of the loan portfolio without significant overheads
• Ease of embedding AI-powered lending capabilities for risk management, loan origination systems, and customer relationship management
• Pivoting the project doesn’t require changing the core infrastructure and saves the cost of launching a separate development project

Disadvantages

• Requires close collaboration with the partner vendor and their integration ecosystem
• Risk of scope creep if not planned well beforehand through exhaustive consultation and competitive industry research

Ideal For

This approach is ideal for any community bank startup, mid-sized credit union, or legacy fintech aiming for a combination of short-term and long-term ROI. Financial institutions that prioritize consumer-end branding and uniqueness in brand positioning among peers can leverage the configurability aspect to their advantage. A configurable platform is also ideal for regional community banks that primarily operate on a relationship-led lending model for small business owners, as it offers hyper-agility to meet their evolving lending needs.

Key Considerations to Identify the Right Implementation Strategy

The business lending system you finalize must be able to offer user-friendly borrower experiences, empower near-instant credit decisioning, and increase profitability amid the high-interest-rate environment of the US lending market. It should be malleable to sudden changes in industry trends, adaptable to new innovations, and robust enough to ensure security and compliance. To do that, the digital lending software should have the following capabilities:

1. Regulatory and Operational Compliance Readiness

One of the most critical needs of regional banks is that the platform must be fast enough to adapt to regulatory changes. Make sure that your business lending system is OOB (out of the box) compatible with local, federal, and SBA compliance. A vendor offering AI-driven tools for automated decision logging or guided user support for the loan lifecycle can add significant value to your compliance efforts.

2. Flawless Connectivity Between all Systems

Modern banks are adopting alternative credit data along with conventional credit scoring to lend to small businesses. The business lending system should be able to extract accurate and timely data from banking financial statements, credit bureaus, and third-party APIs.

3. Exceptional Internal and External User Experience

While most community banks focus on improving the user-friendliness of their digital lending platforms for borrowers, the right one also ensures a top user experience for internal teams. Cloud-based lending dashboards help simplify complex workflows for risk managers, loan officers, underwriters, and business analysts.

4. Risk and Fraud Intelligence

As lenders and borrowers advance, so do threat actors. The business lending system you implement must have robust cybersecurity measures to prevent unauthorized access by cybercriminals. It should be easily configurable to test potential loopholes that fraudsters may exploit. Here again, AI-driven tools in risk management and preventive fraud detection help incur unwarranted losses.

5. Instant Scalability

Cloud-first business lending systems offer multiple benefits in modern small business lending, including omnichannel onboarding, handling loan volume surges, digital KYC, and flexible repayment options. These aspects unlock instant scalability, enabling adaptation to the latest market trends. A configurable digital lending software allows financial institutions to add new loan products and test new revenue streams without additional IT expenses.

Make Your Next Move Future-Proof

Regardless of your decision to build, purchase, or customize, the proper implementation strategy will align with your bank's status in terms of digital maturity, risk and compliance level, and customer experience vision. It’s not only the software you select; it's your roadmap to lending, growing, and competing with fintechs of all sizes in the next decade.

Ready to equip yourself with a configurable business lending system?

Before you invest valued capital into Biz2X platform, we recommend taking a free demo session to understand its on-ground impact and potential ROI.

FAQs about Business Lending System

1. How long does it normally take to deploy a business lending software?

This time frame will vary depending on the route taken: acquiring an off-the-shelf system can take 2-4 months, customizing what is already available can take 4-6 months, and developing a comprehensive system from scratch can take more than a year.

2. Is there a possibility to connect a business lending software to our core banking software?

Modern solutions can integrate through APIs, allowing for the management of data flow across channels in real-time and providing a unified reporting avenue.

3. Is the cost of making a tailored lending system heavy?

Depending upon its scope, cost implications will differ. Still, customization is often as cost-effective as building it in-house and provides a happy middle between cost and speed of functionality. Biz2X platform can further reduce the costs by providing clarity on the short-term and long-term ROI for your lending business.

4. What compliance aspects should the digital lending system have?

The system should provide the ability to record transactions through automation, maintain audit trails, and Support Electronic signatures, as well as comply with KYC/AML requirements, federal reporting forms, including CRA, HMDA, and SBA compliance.

5. Is it worth developing a lending system at a small bank?

Launching an in-house project requires significant capital expenditures, specialized IT skills, and ongoing maintenance. Most smaller ones benefit more in the acquisition or tailoring of a commercial off-the-shelf solution.