The lenders’ challenge is that while they’re
hired to be relationship managers, their day to
day involves an 80: 20 rule, that’s 80 percent
data entry leaving them little time for strategy
and relationship building. In the meantime,
new fintech lenders are eating their lunch.
While lenders are moving towards digitization
to combat this, the pace is slow. They are
focused on making hurdles easier to overcome
but are not focusing on creating a common
language to easily communicate with the
BANKING LANGUAGE 101 Lenders are
undergoing a digital revolution, but this means
different things for banks and businesses. At
Finovate NY lender from a bank known for its
innovation expressed a market challenge they
had: “We’re often asked why our processes are
so traditional if we’re a bank for tech compa-
nies?” To further the point, last week, a head
of lending strategy at a large consulting firm
asked a few lenders what they’re doing to
improve the process of getting loans. This
disconnect stems from the fact that the bank-
speak for digitization is currently different from
the business-speak. Process is the translation
ash management and payments have received massive digital makeovers since 2011.
Infact, banks that invested in digital transformation have 2% higher Returns on Equity 1
than their competitors who chose not to digitize.
This begs the question, why has lending been left behind? To answer the question, it’s
necessary to get into the nuts and bolts of lending. The lending process today involves a borrower, a
lender, and copious amounts of manually gathered information. This data determines whether a
borrower will receive funding or not. Today, traditional lending decisions for SMBs and businesses
take anywhere between three to five weeks with an average time to cash period of three months2.
between business and banking.
BUSINESS LANGUAGE 101 Businesses collect
information that supports their growth. This
information does not necessarily have anything
to do with the metrics lenders use to evaluate
them. For example, they keep track of their
sales opportunities but aren’t prone to calculate
Debt Service Coverage unless an outside party
is asking for it. Infact, they may never be aware
of what metrics are required to get a successful
lending decision. Instead, they get a list of
required information (including personal
statements, financial statements, credit checks,
etc.) and hope for the best.
TRANSLATING BANKING TO BUSINESS With
the advent of cloud computing, more data is
available on private companies. Businesses
have always utilized Back Office Systems and
with cloud computing, they have upgraded to
Back Office Software Systems (BOSS) enabled
by the cloud. Cloud computing has been
gaining prominence in business with SMBs
doubling their BOSS spend since 2016 .
What does BOSS have to do with lending?
Lenders have always looked at metrics and that
THE PRIVATE INVESTOR | FEATURE
The Lending Process
is Due for a Makeover
THE PRIVATE INVESTOR | FALL + WINTER 2019 11
By BOSS INSIGHTS