The moderate rise in interest rates in Q4 2015 is touted as a sign of economic recovery, and is not predicted to impact the growth of lending, particularly small business lending, in 2016. In fact, many experts predict that SMB loans across the country, and especially in the midwest "rustbelt", will see a boom this year, and credit unions are well positioned to take a large chunk of this market share. This can be done by offering creative lending solutions to small and mid-sized businesses.
Unlike marketing your loan products to individual members, who will find features like your mobile lending platform a key factor to choosing you, small businesses will be more attracted to the less fancy, but more efficient, loan features.
For one, small businesses will be going online for loans more in 2016 than ever before. Online lending for SMB's account for about 2% of all small business loans,but they are expected to comprise 16% of the total small business loan volume by 2020, according to a 2015 report by Morgan Stanley.
Teaser rates, variable rates, and even skip-a-pays may be terms that are very appealing to start-ups, who will be low on cash flow to start.
Integrated loan documents and statements within your core processor not only improve your efficiency, but are appealing to SMB's who prefer the benefits that paperless processing provides.
And how about the opportunity to work with businesses, such as car dealerships, to offer third party lending solutions, or indirect lending, to their customers and your members? According to the Wall Street Journal, "Economic signs point to 2016 being the healthiest domestic auto industry in decades thanks to an improving labor market and low interest rates greasing U.S. demand." Indirect lending is like having a loan officer in every dealership in your area. Plus, you offer the opportunity for car dealers to improve their business while gaining members for yourself.
For the small businesses that you already have as loan customers but who may be looking to improve their conditions, credit unions can benefit again by focusing on efficiency. Easy loan modifications, giving you the ability to change terms of a loan automatically, whether to the interest rate, payment amount, due date or grace period, without requiring closing and reopening loans, would be appealing to many businesses, especially ones that could be at risk.
Of course, many of these offerings will impact your risk tolerance when it comes to lending solutions. But with the competitive landscape and the opportunities in the economy, having these options in your back pocket can position your credit union well in 2016. Find out how FLEX's credit union core technology provides these features.