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Three ways credit union lenders can better serve this market
There are more than 30 million small businesses across the U.S. today, accounting for 47.5% of all U.S. employees, according to the Small Business Administration. The prevalence of small businesses presents a significant opportunity for credit unions—to support these organizations by offering them a comprehensive arsenal of financial resources. When small businesses thrive, so do their local communities, which furthers the credit union mission.
With National Small Business Week just around the corner, it’s a good time for credit unions to evaluate their small business member services and identify any gaps. Competitive credit unions are offering small business members a wide range of financing options, advanced remittance capabilities and a sophisticated cash management solution.
Financing Small Business Loans
Financing is often a necessity for small organizations trying to kick-start, mature or diversify their businesses. And the very nature of a small business means it typically has less readily available capital than its large commercial counterparts. To gain a foothold in small business lending, credit unions should offer comprehensive loan and financing options to help small businesses access funds in a way that best meets their needs.
Credit unions still shy away from small business lending today, not least because the process is notorious for being largely paper-based, inefficient and yielding little profit. By avoiding this market, however, they are missing out on a potentially profitable line of business and failing to optimally serve an important member base. Credit unions should instead reconfigure their processes to make small business lending more efficient.
Many of the inherent inefficiencies in business lending are caused by the often-disparate systems used to complete the loans. By keeping data in siloes, borrower information is scattered around the organization, and credit union employees are blocked from gaining a comprehensive view of the borrower and overall portfolio. Storing data in a centralized platform increases visibility and allows for easier integration into other key systems, such as the loan origination system, core business data and other technology used for underwriting and documenting loans.
Automating and digitizing the lending process also helps eliminate paper and boost efficiency. By allowing small businesses to apply for loans online, and then rendering automated decisions based on your credit union’s unique credit policies, you can streamline the process and reduce loan turnaround times. Not only do these process updates better match the speed, ease and convenience that today’s small business borrowers expect, but such workflow changes also increase the potential number of loans, decrease costs and boost profit margins.
Boosting Efficiency With Payments Capabilities
Small businesses often spend too much valuable employee time manually inputting and processing payments. Credit unions can help alleviate this burden by offering sophisticated payments capabilities to more efficiently process checks, payment vouchers, stubs, envelopes, correspondence and coupons. By leveraging a solution from their trusted financial institution that automatically reads and stores the payment amount, endorses the checks, and saves the selected identifiers from coupons, small businesses can significantly reduce manual errors and free employee time for more profitable and strategic activities.
Cashing in on Cash Management
Cash management is another hurdle small businesses must face, and the process is often cumbersome and inefficient. Credit unions can help ease this pain point and better serve small business members by offering robust, flexible cash management solutions. Offering small businesses easy access to their accounts with ACH, wire transfer, reporting and account management capabilities—all within the convenience of the credit union’s digital banking channels—allows business members to better manage their financial health and accelerate cash flow (which leads to on-time loan repayment and lower default rates). Credit unions can, in turn, increase small business member loyalty and open the door for more revenue-generating opportunities.
Credit unions have an opportunity to be a strong resource for small businesses by offering modern tools that support their growth. Such services can deepen member relationships while better positioning small businesses members for success. By dedicating time and attention to small business members, credit unions will be positioned to diversify, strengthen their own bottom lines and better support their local communities.
Pat True is a senior risk analyst with the lending solutions division of ProfitStars®, Allen, Texas. A 25-year veteran of the financial industry, True is the author of numerous banking journal articles and frequently published on Jack Henry & Associates’ Strategically Speaking blog.
