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is why there are always a few community banks with a
billion dollars in assets in most cities here. If you are an I subsequently worked for
ISO, find a way to partner with a community bank in your
area, because their SMBs need your help and expertise. a local community bank that
focused on SBA loans.
I subsequently worked for a local community bank that
focused on SBA loans. The problem was getting the SMB to The problem was getting the SMB
fill out the SBA application. In almost every case, the local
entrepreneur had never written a real, comprehensive to fill out the SBA application. In
business plan, which is an absolute requirement for an almost every case, the local
SBA loan. They had never written one because they found
it overwhelming, which meant that I had to find a local entrepreneur had never
small business consultant to write the plan for them, which written a real, comprehensive
usually took a month and cost a few thousand dollars.
business plan, which is an
The loan process was too difficult and intimidating for a absolute requirement for
small business entrepreneur. That hasn't changed either.
The Fed reports that the average SMB spends over 25 hours an SBA loan.
on loan paperwork. An alternative lender can process an
application in less than 30 minutes.
Challenger banks typically are established companies that
According to writer Chris Nichols, today's banks need seek to compete with banks. Neobanks are new entrants
a single boarding platform. It would include electronic and are usually completely online or mobile. Talk abounds
signature, ID verification, a payments platform, data about this, but as I see it, most SMBs will want to use a
structuring and access controls. This should connect to community bank in their local area, particularly if they
a common database and allow access from the Cloud, an have a relationship with the loan officer. Community
ecommerce site, a kiosk, mobile device, an order delivery banks have a firm footing here. They will add APIs from
service, etc. Banks typically write to and from their core various fintechs that meet their market needs, but they
processors, which would have to offer this connectivity will remain firmly attached to their core processors.
unless the banks can find third parties to do so. That is
where fintechs come in. Where do America's banks stand in all of this excitement?
Third parties and challengers Last year the 5,177 federally insured banks generated
$233.1 billion in net income (4,750 of those are community
Borrowers do not relish filling out forms, but banks can banks). Net interest margin was 3.3 percent. Loan balances
populate them with information the banks already have (if continue to rise, asset quality indicators are stable, and
the borrower is present) and augment it with information the number of so-called problem banks is low at 51. The
from AI and sources such as LexisNexis, Acxiom, Plaid, average net charge-off rate was 0.54 percent. A neobank
etc. Banks also need to focus on providing total solutions or challenger bank would be hard-pressed to meet this
for borrowers, which include a deposit and transaction excellent performance, assuming that they met and
account, line of credit, commercial real estate financing, conformed to all the regulatory and compliance guidelines.
savings and money market accounts, receivables financing,
and any other banking needs. Having access to all this Community banks fill a vital need in even the largest
data gives banks a better picture of the SMB's cash flow in cities, but they cannot afford to hire, train and support a
real time, rather than just once every few months at loan staff to sell fee-based services, such as card processing,
reviews. This is a huge benefit from a risk management payroll, A/R collection, etc. Even a large bank will only use
perspective. a cash management sales force for enterprises, typically
with over $100 million in sales. This represents an ongoing
Third parties can help community banks make it easier for opportunity for ISOs. Keep this in mind as you claim your
customers to do business with them, and banks can often territory.
participate in the loan. Examples include Lendingclub,
Prosper marketplace, Funding Circle and Upstart. These Brandes Elitch has been a cash management practitioner for several
providers eliminate the traditional loan application Fortune 500 companies, sold cash management services for major banks
process, and the SMB doesn't have to do all their banking and served as a consultant to bankcard acquirers. A certified cash man-
with the lender to qualify. These lenders use alternative ager and accredited ACH professional, Brandes has a Master's in Business
credit data, coupled with AI to analyze the ability to repay Administration from New York University and a Juris Doctor from Santa
the loan. Other providers like FundBox and BlueVine can Clara University. He can be reached at brandeselitch@yahoo.com.
allow the SMB to use unpaid invoices as loan collateral. A
big market exists for these upstarts.

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