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.
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.