Competition for factors and asset-based lenders is predicted to further intensify in 2019. Many elements are contributing to this, including an increase in online lending, fundamental shifts changing and shrinking the retail and other important industries, new technologies impacting the transportation industry, and more. At the same time, business owners have come to expect quick response and convenience and are more likely to shop around for funding. At any given time, there may be 3 to 5 lenders looking at the same deal.
What Can Lenders Do to Set Themselves Apart from Competitors?
- Go Digital: Offer all-digital loan origination. Sound impersonal? This doesn’t mean there’s no human touch but the days when business owners have to fill out an online form for you to contact them or download and send a fillable PDF form just to get the application process started are becoming obsolete. Borrowers have many options for funding and implementing a smart all-digital application allows prospects to easily interact and helps lenders securely gather the information needed while keeping the deal moving. Prospects are more likely to choose lenders that ease the process and make it convenient. Further, implementing all-digital loan origination allows direct connection to borrower Accounting systems and Bank accounts to extract and analyze information, helping lenders respond faster, thus becoming a competitive advantage.
- Reduce the Wait. In the Federal Reserve’s most recent Small Business Credit Survey, business owners were most dissatisfied with wait times for credit decisions from Banks and other traditional lenders. The dissatisfaction with wait times has created an opportunity for online lending, with the survey showing a 24% increase in online lending across all lending categories in 2017 over the prior year and each year it has been growing. Further, 40% of businesses applied to online lenders—nearly the same share that applied to large banks (49%) and small banks (47%). To stand out from online competitors and respond more quickly to borrowers, traditional lenders can take advantage of underwriting technology to help them close deals more quickly. Underwriting technology now offers platforms that automatically access 3rd party data providers for immediate results on applicants, provide analysis of financials, alert your team when information is missing or incomplete, automatically file UCC’s and streamline the entire process. Underwriters can get an overall picture of a borrower in minutes freeing up their time on busy work to allow them quality time to assess risk and come to a faster decision.
- Offer e-Signature. Implement e-signature into your agreements and contracts to facilitate faster closing. Lenders can adopt many e-signature systems now available or look for a technology partner that incorporates it. Electronic signatures are legally binding and offer timestamp and identity information. Further, they let lenders streamline account openings, document routing and approvals, and increase transparency and efficiency. Electronic signatures also prevent the hassles of getting documents signed, while giving lenders time to focus on relationship building and closing deals more quickly.
- Boost Analytics Tools. To get ahead of competitors, apply analytics tools to offer higher advance rates to better compete and win clients. Traditionally, receivables finance companies advance about 80-85% even though they could advance more, depending on the client’s receivables structure and collections history. To put a lender in a more advantageous position, implementing better analytics tools will allow effectively analysis and predict dilution and ineligibles in order to be more competitive on advance rates. Some areas of the industry such as freight factoring are already doing this on an invoice basis, but this can also be done in other sectors by using better analytics.
Traditional lenders have many tools at their disposal to help them win more customers by adopting technology to set themselves apart in an increasingly competitive landscape.
Access the full article: Commercial Factor Magazine Feb 2019