After the success community banks and credit unions had helping businesses in their local communities with lending during the pandemic, financial institutions continue to turn to small business loans as a source of portfolio growth.
A recent survey conducted by Abrigo indicated that 89% of institutions planned to increase small business lending efforts in 2022. Many credit unions are looking to begin or expand member business lending programs, and recent inflation has prompted small businesses to seek new lines of funding.
Since small business (SMB) loans often carry smaller balances and may be less profitable for the financial institution than larger commercial loans, lenders need an efficient origination process that makes SMB loans a more attractive undertaking. In many cases, a $50,000 loan goes through essentially the same underwriting process as a $5,000,000 loan, and when that’s true, the cost to originate the small loan may outweigh the benefit.