For SMBs, Online Lending With Community Focus


The online lending space may be in turmoil, but the business model – cutting down on the steps in place to get SMBs working capital – is a resilient one. RC Giltner’s founder, Bob Giltner, explains why traditional community banking is taking a page from the digital upstarts and bringing loans to SMBs in minutes.

The online lending arena is a volatile one at present. The financial press is awash in any number of daily headlines stating that marquee names, such as Lending Club and others, are facing dwindling demand for loans and for investor backing. There’s also the specter of regulatory inquiries into how loans are underwritten, packaged and sold.

Yet, the trend to embrace the internet source of finding and getting funding is a strong one, where speed to approval for loans, especially among smaller businesses, can make a world of difference to firms looking to deal with short-term challenges in gaining scale and sales.

In a recent pairing between the traditional and the tech-savvy, Pinnacle Bank, a community bank serving Georgia with $800 million in assets, said that it had partnered with R.C. Giltner Services, Inc. to deploy the latter’s digital lending platform geared toward consumers and small businesses. That service will go live during the current third quarter of 2016.

In an interview with PYMNTS, Bob Giltner, chairman at R.C. Giltner, said that community banks, “those that have less than $10 billion in assets, are the ones that make half of the small business loans, in a range of $250,000 to $1 million.” These banks, he said, have standing locally and know the businesses that are coming in for loans. And yet, he noted, loans of less than $100,000 are on the decline, with a problem at hand, as $25,000 to $30,000 loans prove to be unprofitable for the banks to make.

Unprofitable, he added, because of the multi-step processes that are in place that demand both time and money to shepherd the application process through. “The first step,” said the executive, “is one where the person, or the small business owner in this case, comes into the bank and meets at the branch with an application that repeats all the information that may already be in the system if that person already has an account [personal] with that bank.” Then, there is the review process that comes after the mountains of paperwork and still more back and forth before monies are disbursed. Giltner told PYMNTS that the cost on, say, a $25,000 loan could be as high as $2,000, which can render that loan unprofitable.

Contrast that with the bank that digitizes and brings the lending process online, where, as Giltner said, there is better speed, visibility and control with the underwriting and lending process (there is a white-label component with the platform offered by Giltner’s firm), winnowed down to minutes, and where the SMB owner can do the application through a mobile device at his or her leisure (or on weekends, when time constraints may be a bit less). The cost to the bank then plummets to $500, thus rendering those relatively small loans profitable.

Noting that the online lending industry has been facing regulatory scrutiny over rates charged, Giltner maintained that community banks adopting the online lending platforms, yet maintaining control, allows bank rates to be charged (largely lower than nonbank lenders); flexibility is also in place with the ability to cross-sell and upsell financing as relationships broaden and deepen with local businesses.