Using digital lending helps to reach small businesses

Photo by Dragana Gordic/Adobe

Improving the small business loan experience is a great way to build new relationships and deepen existing ones. We spoke with industry specialists about the priorities for community banks as they build a digital loan process for small businesses.

By William Atkinson


Digital lending capabilities are quickly becoming table stakes, particularly when it comes to small business lending. It’s critical for community banks to have online loan applications, process automation staff skilled in digitization and more.

However, banks should first consider their customers’ needs and the infrastructure and features needed in a lending platform before adopting a new digital strategy.

Benefits of digital lending

“Today’s customer, whether consumer or small business, has become very comfortable and accustomed to anytime, anywhere self-service,” says Charles Potts, ICBA’s executive vice president and chief innovation officer. “The necessities of a digital-first approach were greatly magnified during the pandemic, with many banks having to close branches and rapidly adopt new digital technology to address the needs of the PPP [Paycheck Protection Plan] loan. Providing a digital lending experience and, at the same time, maintaining a unique relationship banking model is now a critical ‘must have’ for most community banks.”

According to Kevin Wilzbach, director of technology product management for Wolters Kluwer Compliance Solutions, providing digital lending opportunities helps community banks stay true to their mission by providing the best customer experience.

“Consumers have a growing expectation to interact with financial institutions via online and/or mobile services,” he says. “Digital lending is one specific area where community banks can improve customer satisfaction by reducing paper-intensive processes. Additionally, it allows community banks to retain existing small business customers while improving efficiencies.”

“There are numerous reasons to support a digital lending solution,” says Michael Haedrich, a senior product manager at Finastra. Doing so can help community banks:

  • Optimize the loan cycle
  • Offer the ability to speed up the entire process
  • Make it easier to capture applicant information
  • Make quicker decisions
  • Ensure a more consistent lending process
  • Provide convenience by offering its use across multiple devices
  • Take advantage of analytics

According to Haedrich, it’s critical for community banks to offer digital signature as an option. “Not everyone wants to sign electronically, but it needs to be offered,” he says. “As our customer base changes, convenience becomes more critical, and electronic signature is synonymous with convenience.”

Offering a combination of digital, hybrid and paper closing options is also critical, according to Wilzbach. “This allows the lender to meet every client’s needs,” he says. “We believe having a flexible digital closing workflow will deliver the best borrower experience, while creating operational efficiencies for each participant throughout the lending ecosystem.”

“When you go digital, you open new opportunities that you may have found unprofitable in the past because of manual intervention.”
—Michael Haedrich, Finastra

According to Potts, the most important aspect to any digital lending solution for a community bank is making sure there is always a way for the customer to engage with the banker. “At all stages of the lending process, the customer must know there is a banker available to them whenever they wish,” he says. “While creating a frictionless, efficient and seamless experience is critical to the overall efficiency of a digital lending, there should never be any technology disintermediating the uniquely important relationship a community bank has with its customer.”

Rolling out digital lending

What strategies can community banks introduce to make their digital lending program as seamless and easy for small business customers as possible? “When you go digital, you open new opportunities that you may have found unprofitable in the past because of manual intervention,” says Haedrich. He says it can enable opportunities such as microloans in the range of $100 to $1,500, bundled products offered at point of sale and preapproved credit card offers when a customer applies for a loan.

“Banks can apply internal data to make preapproved offers that customers can accept online with a few clicks,” he says. “This is taking advantage of the analytics you now have access to because of your digital lending.”

It is also important to select a provider that offers digital solutions throughout the lending process, according to Wilzbach. “This will create a more seamless borrower experience and provide significant operational efficiencies to the lender,” he says. “Selecting a trusted provider with deep expertise in the digital lending space, and one that can provide solutions for all asset classes, is a huge benefit in helping simplify a lender’s digital transformation.

He adds that community banks should focus on solution providers that can handle all variations associated with a digital lending closing. “Lenders may be hybrid-oriented today or may need to support wet-sign options as necessary,” he says. “It’s important to look for solutions that support you across the digital lending landscape as your needs change.”


Bringing staff on board

There are a lot of things community banks need to do well before and during a rollout of digital lending, but one of the most important involves the bank’s employees. According to Charles Potts, executive vice president and chief innovation officer for ICBA, a proper deployment of a new digital lending solution first begins with a well-crafted training and communication plan for the bank and all its employees.

“Everyone in the bank should understand the strategy behind deploying any new automation and be given a chance to engage with the new solution(s) before a rollout to the customer base,” he says. “Invariably, it is the employees of the bank who will know and understand any pain points or objections a customer may have that may hamper or jeopardize a successful launch of a new service or solution. Being sure everyone has a chance to identify any barriers, stumbling blocks or friction in the process is keenly important to any new digital lending solution.”


William Atkinson is a writer in Illinois.