Quantifying the impact of new technologies has always been challenging. What's for certain is that there are many institutions afraid of new technologies. Change can be scary, especially without evidence that it's for the better.  

In a post-SVB world with higher interest rates, financial institutions are seeking ways to reduce costs. Clients expect more, knowing they can move money quicker and easier. 

Add in the competition from larger banks, fintechs, and neo-banks, and you have a whole lot of pressure. Banks must make smart and cost-effective technological investments to remain competitive. 

Too often a lender will use outdated technology, turn to an existing vendor's outdated technology, or spend money on a solution without considering the cost or financial benefits.  

The result is a slow-moving, inefficient process across the board. The credit team, clients, and shareholders all suffer.  

However, with banks migrating to cloud-based platforms, there's room for opportunity in the industry. Here we will dive into the impact a business lending platform can have and how it can help banks stay competitive.  

What is ROI and why does it matter? 

ROI is king in the industry. Leading resources such as Business News Daily speak of its importance. So it's essential that you understand what ROI is. Return on investment tells a business, investor, or lender how much profit comes from a specified group of expenses. ROI is calculated by dividing the gains of an investment less the related expenses, by the cost of the investment.  

  • ROI = (Gains – costs)/cost of the investments  

The values used for gains and costs depend on the investment.  

For example, if a bank decides to open a new branch, the analysis would be studying the geographic area for existing branch coverage and opportunity in the area - minus the initial property investment and ongoing overhead costs. This determines the ROI over time. 

  • ROI % = (Profit/Initial Investment) x 100 

Most financial institutions consider an ROI equal to or greater than 10.5% as good. 

Exploring ROI can give lenders and business owners valuable information about: 

  • Budgeting: Budget for future periods by understanding the ROI of products used to generate income. Forecast future cash flow and use that to inform staffing decisions and more. 
  • Customer satisfaction: Understand the ROI of digital lending products to allow decision makers to understand what's working and what's not. Determine where improvements can occur by following the ROI.  

ROI for bankers and lenders 

ROI is important because bankers and lenders compile loan portfolios to make money for financial institutions. The ROI of each loan provides debt issuers with profits or losses each lending decision made.  

By analyzing ROI, lenders can increase future ROI by following the decisions that yielded the highest returns.  

Here are some benefits of digital loan portfolio platforms that make up the lenders' ROI.  

SBA Loans Are More Important Now Than Ever

Let’s go digital

Financial institutions must connect with borrowers to earn profits from new loan applications. Typically, this means being accessible for inquiries and applications.  

There must be accessibility so clients can apply when it's most convenient for them. Creating an intuitive workflow that's easy to complete goes a long way.  

There's also the need for transparency. Clients increasingly want more information provided so they can understand what's necessary to complete their applications.  

Banks that choose business lending platforms can cover all the bases. They can improve responsiveness, as the platform keeps both clients and lenders in mind. Additionally, they can improve the client experience, as information is provided throughout the process to both parties.  

Using a full-service digital application as part of a digital platform allows bankers to support their clients in the branch or kick-start an application on their behalf. Using a tailored business lending platform, like those offered at Biz2X will give the following assumption rates: 

15%-20% application growth rate x average size small business loan x average margin of that loan 

Save time and money 

One major concern when it comes to implementing automated, cloud-based lending tools is the cost. However, implementing these tools can lower operation costs by up to 40-50%. You're removing the manual, time-consuming process to issue decisions on smaller loans.  

The average number of bank personnel involved in securing a new loan is six people, including relationship managers, credit specialists, and closing experts. 

There is a better, more cost-effective way to earn revenue. 

Digital workflows, like those included in Accelerate SBA for loans backed by the Small Business Administration or Advanced Credit & Risk Analytics, can qualify candidates upfront through an online portal. 

This also saves bankers time and cuts operational costs by separating qualified and unqualified borrowers.  

The application can auto-populate financial data, spreads, and generate scores faster than a team of analysts working in Excel with a higher level of accuracy.  

Bankers can also communicate with clients within the platform. This allows them to automate third-party verifications during underwriting, which reduces the need to leave the platform, cutting processing costs. Now, banks can focus on client relationships, while credit teams focus on financial analysis.  

The average number of bank personnel involved in securing a new loan is six people, including relationship managers, credit specialists, and closing experts. 
There is a better, more cost-effective way to earn revenue. 

Short-term and long-term benefits 

Are more customers, higher revenues, and lower costs not enough? Don't worry, there are more short and long-term benefits to using business lending platforms. Let's take a look:  

  • Increased “application to funded” rates: Cut down on the time it takes for clients to get responses. Clients tend to expect quick responses these days with the advancement of technology. When they don't get the quick response they seek, they start to look at competitors. Using a digital platform allows banks to work with clients in a more timely fashion, avoiding the worry of them looking elsewhere.  

Using a lending platform, like the products offered at Biz2X, can result in an application-to-funded ratio of 10%.  

  • Lowering default risk – Reducing risk is always a priority for financial institutions. With Bix2X’s risk analysis tools, bankers have access to artificial intelligence (AI) generated scoring and instant cash-flow analysis. This translates to better credit decisions and a more profitable loan portfolio. Loans that are considered higher risk are automatically quoted higher interest rates and financing costs than those for lower risk borrowers.  

Takeaways 

Now you know the importance of ROI and the impact that business lending platforms can have for you. Integrated, digital, lending tools from Biz2X are the most efficient, cost-effective ways to increase loan revenues while cutting operational costs. Improve your customer satisfaction and profits in tandem and make use of the technology available today. 

Schedule a demo today to learn which products are right for your lending needs.