Can your bank use data to grow SBA lending?

Annemarie Murphy

Annemarie E. Murphy says First Bank of the Lake is investing in technology to boost its SBA lending. | Photo by Ian Curcio

Small Business Administration (SBA) lending has seen major changes in the past year. Amid these trends, some community banks are harnessing internal and external data sources to find potential SBA loan customers.

By Beth Mattson-Teig

In an industry that relies heavily on relationships, community bankers are also learning to embrace data analytics to build on their Small Business Administration (SBA) lending activity.

In Osage Beach, Mo., $200 million-asset First Bank of the Lake generated $132.7 million in SBA 7(a), 504 and Express loans in its 2020 financial year. Annemarie E. Murphy, the community bank’s executive vice president and president of SBA lending, says they’ve recently invested in sales and marketing technology to provide a more efficient loan experience to customers.

To that end, the community bank uses Wilmington, N.C.-based nCino’s cloud-based bank operating system as the bank’s workflow process and customer relationship management (CRM) tool. The sales team uses the CRM component for customer outreach and direct marketing to both existing and potential new customers. The community bank takes a targeted approach, using data it gathers to target specific industries such as doctors, dentists and veterinarians, as well as franchisees.

Since the pandemic began, First Bank of the Lake’s sales team has had to think differently about how to market to potential SBA customers. It’s no longer as simple as meeting someone for a cup of coffee, Murphy says. “For some of our salespeople who used to do a lot of their sourcing at trade shows,” Murphy says, “[the pandemic has] really changed how they have had to do things.”

Today, the sales team relies more on CRM marketing to get in front of people with email and digital marketing. The SBA team uses the system to track existing and potential customers, as well as to reach out directly to industry leaders who can provide referrals.


Leveraging existing loan data

Most community banks don’t have the budget to pay for third-party marketing data to generate leads. So, the first step for many is to tap into data available within their existing loan portfolio and CRM systems.

“What COVID exposed is that you have to be able to identify what percentage of your book is in these different industries, and then understand the loan opportunities the SBA can provide.”

—Shawn O’Brien, QwickRate

“Banks all have great data, but they don’t all have great ways of harvesting data and analyzing it very easily,” says Shawn O’Brien, president of Marietta, Ga.-based QwickRate. Solutions like QwickAnalytics and IntelliCredit offer ways to take data from different systems throughout the bank and bring it to life in a way that allows banks to better serve customers, he adds.

Community bankers can use analysis to gain a better understanding of their existing loan portfolios and more proactively reach out to clients with SBA and other products. According to O’Brien, COVID-19 has had a disparate impact on different industries, so it’s important for bankers to take this into account as they work with their data. “Oftentimes, banks look at their loan portfolios as a whole, and what COVID exposed is that you have to be able to identify what percentage of your book is in these different industries, and then understand the loan opportunities the SBA can provide,” he says.


Finding more uses for data

Community banks have been taking advantage of analytics tools that allow them to dive deeper into their existing loan portfolio to find potential SBA customers, according to Arne Monson, president of Holtmeyer & Monson. The Memphis, Tenn.-based lender service provider offers banks an outsource alternative for SBA lending and currently manages about $1.5 billion in SBA and U.S. Department of Agriculture loans for its bank clients. “Now is the perfect time for this, because we do have a lot of borrowers who are stressed because of the pandemic,” Monson says.

For example, many businesses with long histories of successful operations had to close or reduce operations during the pandemic. Community banks could apply analytics to their existing portfolio to identify existing borrowers that may have weaknesses, and then use SBA loans to get that debt restructured. Doing so gives the borrower more working capital, while the SBA guarantee reduces the risk exposure for the bank. In the past, those analytical efforts tended to be more reactive, such as when borrowers were flagged for being 30 days past due.

“Now, with the analytical tools that are available, banks can be proactive and look for borrowers that may be stressed and head that off before it gets into a delinquent situation,” Monson says.


An opportunity to grow

It’s an opportune time for community banks to grow their SBA portfolios or get started with SBA lending. Not only are many small businesses hungry for capital due to the effects of the pandemic, but as part of its stimulus efforts, the government has worked to make SBA loans more accessible. Notably, the SBA has waived guarantee fees for its 7(a) and 504 loans and increased its loan guarantee on 7(a) loans from 75% of the loan amount to 90% for those loans funded during fiscal year 2021.

“There is a lot of data that we have tried to bring in from different areas to not only get new business, but also to be able to put someone on that ‘call later’ list.”

—Christopher Annas, Meridian Bank

Increasingly, banks are leveraging data already at their fingertips within CRM systems, existing loan portfolios, fee-based third party databases and other online sources to generate SBA leads.

“There is a lot of data that we have tried to bring in from different areas to not only get new business, but also to be able to put someone on that ‘call later’ list,” says Christopher Annas, founder, president and CEO of $1.7 billion-asset Meridian Bank in Malvern, Pa. The community bank uses internal data culled from its in-house CRM system, as well as external data from sources like ZoomInfo and LinkedIn to identify potential customers.

CRM data can be used to develop prospect lists, as well as help banks to better understand the different businesses operating in their geographic markets. Most CRM systems are searchable, which allow the loan team to easily search by industry or size for direct marketing and outreach.

“It’s also very informative in creating a chronology of information on existing customers to know what’s going on with them,” Annas says, adding that Meridian Bank’s CRM system has helped the bank grow both its SBA and conventional loan business.

“You should be informed coming in to talk to a potential client about their business and what they need,” Annas says. “It cuts to the chase, and the small businessperson really appreciates that, because you can engage so much more quickly with someone to get them a solution.”

PPP loans create new pipeline for SBA loans

pipe twisted into a dollar sign illustration

The Paycheck Protection Program (PPP) introduced thousands of businesses to SBA lending and created a pipeline of potential new clients for community banks.

First Savings Bank in Beresford, S.D., originated 1,309 loans totaling $107 million during the first round of PPP. Many of those loans came from new customers whose financial institutions were not participating in the PPP. The second wave brought another 820 applications totaling $81 million.

“PPP loans from noncustomers have been a good calling source to now expand the customer’s loan and deposit business and try to get these businesses to move their full relationship to our bank,” says Morgan Larson, president and CEO of the $1.1 billion-asset community bank, which is an active SBA 7(a), 504 and Express program lender.

“Our pipeline has really been enhanced by all the PPP loans that we did initially in April and May [2020] and now in this third round,” says Christopher Annas, founder, president and CEO of Meridian Bank in Malvern, Pa. The community bank has about 600 third-round PPP loans that are in various stages of approval. “Some of these would fit right into the SBA program, and we capture all of that data in our Jack Henry system and in our CRM system,” Annas says.

Historically, borrowers have been apprehensive about SBA loans. Many perceive it as a cumbersome process due to government involvement, says Arne Monson, president of Holtmeyer & Monson in Memphis, Tenn. However, the PPP has given more borrowers exposure to the SBA. Although there were some shortcomings, the program generally worked pretty well in giving borrowers access to needed capital, Monson says. “So, those PPP customers are now potential SBA customers,” he adds.

Beth Mattson-Teig is a writer in Minnesota.