Oregon Bankers Association
By Mary Ellen Biery, Abrigo
The good news for banks and credit unions? Small-business borrower satisfaction is higher for these lenders than for online lenders, according to a new Small Business Credit Survey by the Federal Reserve. The not-so-good news? Satisfaction with online lenders has increased over the last two years, even as net satisfaction with large and small banks has stayed relatively flat or declined. Online lenders also saw a moderate increase in their share of applications from small businesses, to 24 percent from 20 percent in 2015.
“Applicants to online lenders report being attracted by the speed of credit decisions, improved funding chances, and lack of collateral requirements,” the 2017 report said.
Top complaints from business borrowers
Long waits for decisions and a difficult application process are the most common challenges faced by small business owners when applying for loans at banks and credit unions, according to the study. Applicants to online lenders less frequently reported aggravation in those areas, as they have in past surveys. Instead, high interest rates and unfavorable repayment terms are the most common challenges cited by business owners dealing with online lenders. Those are two areas where banks and credit unions continue to get more favorable reviews.
The latest Fed survey also found that applicants tend to choose a lender based on their chance of being funded rather than the cost or interest rate. For business owners who applied for loans through small banks, speed of decision also outweighed both product flexibility and lack of collateral requirements in level of importance.
For most banks and credit unions, the current lending process largely dictates turnaround time. Bottlenecks tied to missing borrower or financial information and the need to enter data in multiple systems can delay decisions. A credit analyst typically won’t review an application until the application and any related documents are completed, presenting a first major obstacle to a speedy decision or positive funding outcome. In fact, during a recent Sageworks webinar, nearly half of the bankers surveyed said that almost every process involved in lending takes twice as long as it should.
Growth-seeking banks and credit unions that aim to streamline the lending process and provide faster decisions increasingly are looking to:
- online loan applications
- digital portals for uploading required application documents and
- automated decisioning aids.
Removing some of the friction from the existing application process as well as improving coordination among the roles involved in the approval process will enable financial institutions to provide decisions more quickly and have a more efficient organization.
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To read the full article featuring Abrigo, visit Oregon Bankers Association’s Banking Matters, “Survey: Long Waits and Difficult Applications Aggravate Small Business Borrowers.”