Responding to loan requests with a simple “yes” or “no” is an outdated way of doing business in this digital world where relationships are more important than ever. By FINSYNC The lending landscape has changed drastically over the past decade, and banks that don’t adjust to the changes sweeping the industry may be in for some real challenges. Traditional bank loans are no longer the only option for small businesses in America, as the growth of online lending has given business owners a new avenue to secure financing. The Rise of Online Lending Back in 2015, the SBA reported, “A new generation of online lenders is surfacing with the promise of an efficient, streamlined application process with quick turnaround times and higher approval rates.” The report went on to note that borrowers spend a mere 30 to 60 minutes on online loan applications, which can be funded in a matter of days, whereas the traditional loan application process takes an average of 26 hours and may not be processed for weeks or even months. More recently, a 2018 report on small business lending in the U.S. detailed how a handful of the largest small business lending platforms are filling a financing gap for small business owners. NDP Analytics, an economic research firm based in Washington, D.C., reported that five online lending platforms alone funded $10 billion in online loans from 2015 to 2017, which generated $37.7 billion in gross output, creating 358,911 jobs and $12.6 billion in U.S. wages. Needless to say, we’re far from business as usual in the banking world when it comes to small business lending. The Opportunity of Online Data Access to online financial data streamlines both the loan application and approval processes, benefitting both lenders and borrowers alike. However, there are many more benefits to unlock in this newly charted territory. What if access to a business’s financial data could open up a dialogue between lender and borrower in a way that elevated the interaction from a mere transaction to an ongoing relationship? Along with the ease and access that online banking offers, small businesses in America are looking for more out of their lender than a simple “approved” or “rejected” response. Beyond “Yes” or “No” As we all know, a solid relationship is based on an ongoing dialogue rather than a communication dead end. What’s true in life is most certainly the case in banking. For far too long, the conversation between lenders and their clients has ended with, “No, I cannot help you with financing.” What if the conversation — and relationship — could continue, even when a bank opts not to finance the loan? The payoff, of course, is a long-term relationship and all of the future business that comes along with it. Banks and credit unions in FINSYNC’s Lending Network are given three options every time they receive a loan application to review:
- First, the member bank can assess the financial data provided by FINSYNC and opt to approve the loan for their own balance sheet.
- If the bank determines that the business isn’t quite ready for traditional bank financing, the lender can seamlessly share the application with another member lender that’s prepared to approve and fund the loan on behalf of the bank.
- If the bank determines that the business is not ready for financing at the present time, they can show the business how to get where they need to be. As part of FINSYNC’s cash flow management solution, the bank can communicate milestones and actionable steps that the applicant can take to qualify for financing in the future.
How Business Banks Can Become Business Partners In order to survive — and thrive — in changing times, banks need to evolve from the limited role of being a business bank to becoming a long-term business partner. By FINSYNC Would you rather be seen as a business bank or a business partner? Most banks, if not all, would opt to be a true business partner. But what does that mean, exactly, and how do you get there? Even the most well-intentioned banks often don’t understand what it takes to build a true partnership. The key? Technology that adds real value. Elevate your relationship from a common business bank to a highly valued business partner with tools that can help both you and your customers grow. The Limitations of Business Banks What’s wrong with being a business bank? Nothing, of course, other than its obvious limitations. Business bankers are common, and easy to fire. A partner, on the other hand, adds value and is much less expendable. Traditionally, the interaction between a business bank and its customer ends with a yes or no response, as in “yes, we can help you with financing” or “no, we cannot help you.” Binary banking represents the old way of doing business and, in our opinion, is on its way out. For a business bank to become a true partner with their client, this dead-end dialogue must be expanded. Business partners can do much more for their clients than simply finance a loan. When harnessing the power of technology, deepening these relationships to partnership status requires banks to invest minimal effort and resources. What it Means to be a Business Partner According to a recent FDIC report, anywhere from 77 to 89 percent of business banks don’t offer their customers the ability to apply for financing online. Beyond the convenience and ease of connecting with clients via the web, access to financial information online can help banks build a mutually beneficial partnership that can grow with the client. A business partner is an advisor that can help steer a small business along the path to success. Sound complicated? It’s not when you have access to your client’s financial information through a platform like FINSYNC. If your client doesn’t qualify for a loan, for example, the conversation doesn’t have to close with a “no” that does nothing to continue the conversation. Instead, FINSYNC lenders can tap into historical financial data to analyze their client’s cash flow in order to show the business exactly where they need to be in order to qualify for a loan in the future. Armed with this valuable information, a business is given an actionable goal that comes with the assurance of qualifying for financing, should that goal be met. And therein lies the value of a partnership. Partners for the Long Term This type of guidance from a business partner lays the foundation for a long-term relationship as opposed to a one-off interaction that often ends with a discouraging “no, we can’t help you.” When the conversation continues with, “Here’s where your business needs to go to qualify for financing,” the applicant not only has a roadmap to follow, but knows exactly where to go for funding when they’re ready. Better yet, for both the bank and their customer, when you’re connected through a lending network like FINSYNC, there’s no need for the business to re-apply for the loan. When they hit the numbers laid out for them, qualifying for a loan is as simple as one click. The same goes for a business that has secured a loan previously through the FINSYNC Lending Network. When the applicant needs additional access to funding, they can secure a loan with a few quick clicks in a matter of minutes, significantly reducing the effort required by both the bank and their client. There’s no new application for the bank to review, as the relationship has already been established and the online financial information speaks on behalf of the business. These types of streamlined transactions save time, resources and frustration on both sides, and make for the kind of partner relationship that businesses expect in today’s digital world.
What would happen if Amazon were to get into the banking business? By Tucker Mathis, CEO, FINSYNC, Inc. FINSYNC is rapidly building a network of banks that use our technology to connect with customers in search of financing online. As a “fintech” company, we are often asked about other technology companies and their potential impact on the banking industry, should they elect to throw their hat (or weight) into the ring. Most commonly — Amazon. Uniquely enough, I love the question because it teases out something I am very passionate about, and that’s the desire to be in the relationship business (as opposed to transactional). If banks want to build a defensible competitive advantage over Amazon banking, they too will need to move to the mindset of being in the relationship business. This may sound obvious, but it’s not. I meet with bankers all the time that speak of a desire to innovate, then describe the box their idea needs to fit within and the areas where it cannot overlap. If only I could walk into my next bank board meeting with Clay Christensen, who authored The Innovator’s Dilemma. He has a message in that book that everyone in the banking industry should stop and read, if they haven’t done so already. If I had to summarize it in one sentence: Innovating in fear of staying within a box, or a previous product, process or price — isn’t innovating. For a bank to truly be in the relationship business, they, like Amazon, have to innovate and always iterate in an effort to earn the customer’s business and loyalty long term. For most banks, this requires a change in mindset and a willingness to adopt new technology and processes. All of this can be overwhelming for a bank. I recently attended a bank conference where the bankers were outnumbered almost three to two. That is, there were three vendors for every two bankers at the conference. In this kind of environment, how does a bank decide with whom to innovate? Or, to partner or to build? Building is very expensive and risky and should only be considered by very large, well-capitalized banks. For the other 4,000-plus banks and 6,000-plus credit unions, I can help make your job easy. Think about your customer first. Look for and then adopt the solutions on the market that are proving to create the most value for your customers while also helping your financial institution to increase revenue, reduce risk and improve the overall relationship you have with your customers. If your customers win, you will win irrespective of who enters the market. FINSYNC makes it easy for you to connect with your customers online in order to strengthen these all-important relationships, and ultimately fund more loans. Joining FINSYNC’s Lending Network allows you to offer your customers an online financing option that goes beyond traditional lending — and requires no IT investment or implementation on your end. When you’re not ready to approve a loan, FINSYNC helps you continue the relationship by presenting the business with actionable steps they can take to secure financing with you in the future. We also help businesses with advanced cash flow analytics and projections that allow them to show you exactly where their business is going. It’s a value-add for both you and your customers, and it all begins with your relationship.
ORIGINALLY PUBLISHED ON BUSINESSWIRE HERE FINSYNC is Rapidly Closing the Gap Between Online Banking and Online Lending FINSYNC expects to have over 2,000 banks in its lending network within 24 months. ATLANTA, GA - February 28, 2019, FINSYNC, Inc., a cash flow management platform for small to midsize businesses, is adding new banks to its lending network at an accelerated rate. FINSYNC makes it easy for the businesses who use the platform for cash flow management or modeling to connect with banks, credit unions and lenders online for quicker access to capital. “Businesses who apply for financing through FINSYNC can now request their current bank be added to the FINSYNC Lending Network, in the event the bank is not already a listed member. Since introducing this new capability, a new bank has been added every day, and we see this number climbing quite sharply for many reasons,” says Tucker Mathis, CEO of FINSYNC, Inc. Why Banks are Flocking to FINSYNC’s Lending Network
- According to a recent FDIC report, approximately 80% of banks currently do not offer their business customers the ability to apply for financing online in any form. Tucker adds, “An even greater percentage share with us that they don’t feel equipped to efficiently and effectively underwrite loans below $500,000.”
- FINSYNC solves some very specific problems that are resonating with business owners, including the ability to apply for financing with their bank online, and getting credit for where their business has been and where it’s going. When applying for financing through FINSYNC, the business syncs their bank account, which allows FINSYNC to help business owners understand their loan options based on actual cash flow and assumptions about the future.
- When businesses apply for financing from their bank through FINSYNC, the bank benefits from advanced analytics that include projected cash flow and tools that can help a business illustrate where it believes it is going.
- In addition to advanced analytics, member banks benefit from seeing alternative loan options that are available through a network of lenders. The member bank can present the best loan option to their business customer alone or in partnership with any other member lender that’s part of the network.
From long-term, low-interest-rate loans to quick cash you can secure with shaky credit, learn about five popular ways to fund your small business. By FINSYNC Finding a small business loan that suits your specific needs — and you can realistically qualify for — can be a tricky prospect. The best type of loan for your business depends on several factors, including how long you’ve been in business, what you’re going to use the funds for, if you have collateral, and how healthy your credit is, to name a few. Learn about five popular options that may be available to your small business, depending upon your specific situation. Term Loan When you think of a traditional bank loan, you’re likely thinking of a term loan. Issued by a bank, these loans have fixed interest rates and are paid back via monthly or quarterly payments made over a defined period of time. If you’re a well-established business with excellent credit and solid financials, this may be the most favorable loan you can get. Term loans tend to have the lowest interest rates, and you can borrow a large amount of capital. However, they can also be difficult to qualify for, and you can expect an in-depth application process — something to keep in mind if you need cash in a hurry. Term loans also generally require collateral. Business Line of Credit The difference between a term loan and a business line of credit boils down to flexibility. With a line of credit, you use it when you need it (up to a set limit) and only pay interest on what you use. You have the freedom to draw from your line of credit whenever you need to. Lines of credit can provide the security of a cash cushion for your business, which can be especially helpful if your cash flow tends to fluctuate or you frequently face unexpected expenses. A business line of credit may be fixed or revolving. The latter works a bit like a credit card combined with a cash advance. Once you repay what you’ve borrowed, your line of credit resets and you may borrow up to your limit again. A fixed line of credit doesn’t reset once you’ve used it. Like term loans, lines of credit can be difficult to qualify for, though you’ll have a good chance if you’re an established business with excellent credit. Equipment Loan Does your business need a new printer? A delivery van? Perhaps you’re starting a food truck? Equipment loans are worth considering, as they can help you purchase both new and used equipment. The beauty of an equipment loan is that the equipment itself serves as collateral. Unlike many other types of loans, it generally makes no difference if you’re a brand new business. If something happens and you can’t repay the loan, the lender is entitled to the equipment itself. Invoice Financing If you’re in the business of invoicing customers, you’ve likely encountered some cash flow issues caused by late payments. Invoice financing allows you to borrow money against the amount of money you’re owed, so you can get the cash immediately — without having to wait for your clients to pay up. Borrowing against your unpaid invoices can be as simple as a click and you get funds fast, which can help you avoid cash flow dips that may make it difficult to pay your vendors or even your employees. Like equipment loans, invoice financing is also less difficult for new businesses to qualify for. Is your credit less than stellar? We’ve got good news: The credit of your customers matters more than your own with this type of loan. SBA Loan The Small Business Administration helps businesses that may have difficulty qualifying for a term loan by teaming up with banks to guarantee part of the loan. This win-win situation reduces the risk for banks and allows more businesses to qualify for low-interest-rate loans. While SBA loans are open to new businesses, long repayment terms and low interest rates mean that they’re highly competitive. There are several types of SBA loans. The most popular is the SBA 7(a) loan, a flexible loan up to $5 million that small businesses can use for nearly any business purpose. If you need funds for commercial real estate, to renovate your business or for equipment, consider a SBA CDC / 504 loan. In this program, a bank funds up to 50 percent of the loan while a nonprofit certified development company (CDC) covers up to 40 percent (you’re responsible for the final 10 percent of project costs). In order to qualify, you’ll need to occupy at lease 51 percent of the space you’re funding. If you want to borrow $50,000 or less, the SBA’s Microloan program may be for you. For this type of loan, the SBA partners with community-based non-profit lenders to offer smaller loans. The average Microloan is for around $13,000 and has terms up to six years. Streamline Your Efforts Don’t let the variety of loan options out there overwhelm you. Online tools like FINSYNC simplify the loan application process by connecting you with a diverse lending network that offers a variety of loan types — via one simple application. Simply tell us the purpose of the loan and what type of collateral you have (if any), and we’ll do the rest.