America’s small businesses find themselves in a precarious situation. While the Paycheck Protection Program has ended, the pandemic has not.
A resurgent virus, fueled by the Delta Variant, is causing cities and states to reconsider mask and social distancing restrictions, creating uncertainty when “normal” was thought to be around the corner.
While most cities and states remain more open now than during earlier waves of rising infections, the constantly shifting landscape is creating a-typical business cycles for many.
Without the Small Business Administration’s PPP to bridge these gaps, many small business owners are searching for working capital lines of credit. In fact, searches for this kind of secured lending product have spiked near the end of each round of PPP over the last 12 months and are once again on the rise today.
Unfortunately, when businesses search Google for such financial products, it’s not their local community banks or credit unions they’re finding.
Alternative lenders like OnDeck and BlueVine dominate the search results page—as well as roundups by industry publications, like this one from NerdWallet—and even outrank the SBA’s own 7(a) loan page.
This is a big problem for banks and credit unions.
As we discussed in a recent blog, the sales target in business banking has shifted. As small businesses were forced to become more digital over the last year, they also began to prioritize convenience over almost anything else.
In fact, a recent Bain & Company study showed that, when businesses needed capital most, ease of use and convenience almost always trumped institutional loyalty when it came to choosing who to bank with.
This “hidden defection,” as Bain & Company put it, of borrowers “buying products from banks and providers other than their primary bank”, is fueled by an inability to find a similar offering from their primary institution, and by subsequent internet searches that send customers into competitors’ arms.
In order to keep current customers that need working capital lines of credit—and to attract those searching for them-—banks and credit unions must adopt technology that can make the process easy for financial institutions and their clients.
Digital lending platforms like Numerated are purpose built for complex business banking products like these, and can dramatically reduce work for lenders and their borrowers by using data.
Working capital lines of credit are difficult to process because they require a lot of paperwork, difficult collateral analysis, and a ton of back-and-forth between the front and back offices. Further, they often require the use of multiple, desperate systems that force lenders to constantly key and re-key information, creating ample opportunity for human error.
Numerated’s digital lending platform reduces time and work required to process lines of credit secured by specific collateral with a feature set that maximizes lending efficiency and improves the customer experience.
With Numerated, banks and credit unions have a single, unified platform that:
- Makes collateral detail collection easy by digitally requesting details on assets for security and all business asset liens.
- Enriches applicants’ data with third-party data aggregation that flags areas of risk, informing focus issue analysis.
- Automates debt service coverage ratio calculations and working capital asset analysis, providing insights on sources of repayment.
- Eliminates rekeying and manual work with automated generation of UCC-1 documents.
According to an informal poll of bank and credit union leaders, conducted during a recent weekly webinar, just 6 percent of respondents said they had a digital solution for secured lending products like working capital lines of credit. More than half said they still use pen and paper at their branches.
Institutions that find themselves in the latter camp risk losing ground and market share to competitors that are more digitally mature, and to alternative lenders that were born online.
For a better understanding of how banks and credit unions are leveraging Numerated’s new secured lending capabilities to provide working capital lines of credit, watch our full demo below.