Speed To Market Is Critical In Small Business Loan Underwriting

Speed To Market Is Critical In Small Business Loan Underwriting

In Featured, Small Business Loan Underwriting by Yulia GnatyukLeave a Comment

8 Minutes Read.


The demand for small business loans is growing at an astonishing pace worldwide, which presents new opportunities as well as formidable challenges to traditional lenders and small lenders alike. Both large and small lenders are facing stiff competition for small business loan underwriting business.

Small lenders – with their agility and aversion to lower risks – pose a challenge to traditional bank lenders. And among themselves, small lenders compete fiercely to gain an edge through offering faster service without taking reckless risks.

MonJa: Speed of Small Business Loan Underwriting

Those lenders who can find the right formula to offer loans through the underwriting process quickly without sacrificing underwriting criteria will be in the best position to grow their loan portfolios.

Growth of Small Business Lending

Small business lending is an area of finance where supply and demand seem to feed off each other. Robust demand for small business loans is encouraging the entry of new lenders and the further development of alternative lending sources, with the resulting increase in available credit encouraging even more small business growth.

Favorable economic conditions are helping to drive demand for small business loans and thus overall opportunities for small business loan underwriting growth. According to the latest NFIB Small Business Optimism Index, about 29 percent of small and medium enterprises surveyed said that they would consider expanding their businesses during the third quarter of 2018, citing the ease of obtaining credit and an improving employment market

That recent data reflects a need for small business funding that has existed for years.  A report by the Federal Reserve Bank of Cleveland found that nearly half of small businesses seek additional capital each year for operations or expansion.  Many do not obtain loans, however, due to various obstacles, including difficulties in dealing with traditional bank lenders or a lack of reliable alternative lenders.

Small Business Loan Underwriting Challenges

Traditional bank lenders have a reputational advantage because of their perceived stability and security, but it is these same attributes that put them at a disadvantage in the growing small business lending sector.  Because many traditional banks are working with large legacy systems, their adoption of more flexible data and customer management programs has been slow compared to alternative lenders, many of whom start on the ground floor with the latest FinTech solutions already in place.

Speed To Market Is Critical In Small Business Loan Underwriting

Traditional lenders are also generally more risk-averse than alternative lenders. This is partly a consequence of the highly regulated nature of the banking industry.  Partly because banking systems prevent – or at least discourage – many banks from assessing creditworthiness of potential borrowers using broader data.  As a result, borrowing through traditional lenders is typically a tedious process – slow, requiring too much paperwork and involving too many manual processing steps.  Loan growth among big banks is picking up, but there is still a wide disparity between traditional and alternative lenders.  The Biz2Credit Small Business Lending Index noted that 26 percent of small and medium business loan applications to big banks in the U.S. in June were approved, which was an increase from previous months.  But at the same time, small business loan approval rates at smaller banks, credit unions, and other alternative lenders jumped to nearly 65 percent.

MonJa Can Help

The key to improving competitiveness in the lending market is speed. Reducing underwriting time without increasing risks or compromising creditworthiness criteria allows for faster, more accurate decisions on loan applications, and reduces overall processing time. Read more about how to select what questions to ask  lending automation vendors here.  

In the Federal Reserve and Biz2Credit reports noted earlier, a preference among small and medium business borrowers for lenders that can offer simpler, faster application processes and quick turnarounds is clear.  MonJa can help, with solutions that offer speed, ease of implementation and robust data management.  We allow any bank or lender to build its small business loan portfolio quickly and securely, whether in C&I loans, CRE loans, auto lending or any other small business loan offerings.

The MonJa Small Business Loan Underwriting “3-in-1” Platform combines automated underwriting, an AI-powered risk algorithm and loan scoring functionality to create an end-to-end lending management solution for small business loans.  Our flexible system can manage loans of any size, eliminating profitability concerns about smaller loans and improves efficiency and speed of decision-making processes by providing all the necessary tools in a single platform.  With the inclusion of a white label mobile app for loan applications, MonJa helps you build brand awareness while offering your customers a smoother, faster way to apply for a loan.

With the use of traditional credit criteria with MonJa’s Loan Score™ and AI-powered risk assessment, sound, objective underwriting practice is possible in the fraction of the time of conventional, paper-based processes.

Implementation of the MonJa Small Business Loan Platform is easy, fast and affordable. The versatility of the program makes rapid integration with your existing system possible, and its intuitive, user-friendly design means that your staff can become confident with the program quickly.  And one can keep startup costs manageable as well, as MonJa offers a pay-as-you-go payment structure that scales with your origination volume.

Take the next step to learn more about how the MonJa Small Business Loan Platform can help you build your loan portfolio and your bottom line by requesting a free demo today.

Request MonJa's Small Business Loan Underwriting Demo Today!

Our platform supports C&I, CRE, auto and other small business loans.

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