Lenders no more just cater to big fishes in the market, but they are also equally keen on catering to smaller businesses as well as start-ups. There is no debating the fact that the millennials comprise the bigger part of the consumer pie. They are also the future. Not catering to them and offering them best services today can potentially leave even the biggest of lenders, banks, and credit unions high and dry in the long run. All that said, the way to approach the millennials owning small businesses and start-ups is completely different from how we approach the bigger corporates.
Change in mindset of the lenders
Earlier small business loans were often considered as an overhead by financial institutions and banks, especially by their commercial departments. This perception has been changed to a great extent, thanks to the advent of mortgage technology solutions that have evolved and taken the mortgage industry by a storm.
It is interesting to decrypt how this change in mindset happened over the last few years. Earlier small business loans amounted typically to around $750,000 or less. The commercial officers compared such loans against the big ones on three parameters primarily being, risk, size, and cost of origination. The comparison clearly proved that the pond had bigger fishes to cater to as it is the big name that can shape the portfolio of a lender at the same cost of loan origination.
What changed with mortgage technology?
The resources allocated to a small business loan and the costs associated with them were same as the ones with bigger business loans of big corporates. The risk associated with small businesses was also high as there was no proven track record or history of the borrower. These were the obvious reasons why lenders were rarely interested in funding the smaller businesses.
With the entry of loan software in the loan and mortgage industry, things dramatically changed for good. What these technological tools did was streamline all the processes of loan origination, making it simpler for lenders to manage the entire process. Most of the mechanical work of loan officers got automated with these software, bringing down the overall burden to bare minimum.
How do loan software work in small business space?
Small business loans are more or less similar to consumer lending and this is the reason why loan or mortgage solutions are so effective in carrying out their origination process. The software picks up the process right from the borrower’s application entry, takes it through auto- decisioning based on pre-fed matrices and pretty much automates everything thereafter. This saves hours of time loan officers otherwise used to spend on data analysis and paperwork.
Small businesses and start-ups owned by millennials
All lenders, big or small, have their own strategies to allure millennials who own small businesses and start-ups. Clearly the future belongs to them and if we don’t want to be left out as lenders, then providing them with the best digital solutions with great user experience is the only way to grow. Even the smaller lenders who have integrated software solutions that are fully digital and can be accessed by the business owners on the move, are the ones who are eating the big piece of the pie, with some of them even surpassing big banks and lending institutions