For many commercial loan situations, specialty lending can contribute specific solution value. Specialty loans can greatly attenuate risks involving a company’s economics, scalability and continuity. When expanding your bank’s specialty lending, such as SBA lending, engaging a qualified lender service provider (LSP) can be very beneficial. LSPs often provide an immediate income boost, economically fill in gaps in your staffing, and deliver proven practices that improve your loan efficiency.
1. Immediate Profitability on Loans
Outsourcing a LSP, such as Bank Solutions, will allow your bank to enjoy immediate and enhanced loan profitability. The costs for a bank to have an internal SBA department can easily exceed $500,000 per year. This factors in the total added costs of a department manager, compliance costs, and associated fixed costs. Depending on the ensuing level of SBA lending experienced in any given year (most banks fail to include a development budget), it’s not unusual to struggle to break-even with such high costs.
A lender service provider eliminates additional fixed costs and provides instant service to generate greater profit for your bank on every single SBA loan!
2. Staff & Experience
Trying to attract experienced and skilled SBA loan officers for employees at your bank is neither easy nor cheap. Inexperienced in-house SBA staff, on the other hand, often do more harm than good and can put your potential borrowers at risk. Without experience in the guaranteed lending genre, and process practice through SBA lending volume, internal staff often have trouble properly servicing clients, which often translates into margin drops. A lender service provider solves the problem of recruiting in a limited market for high talent SBA loan officers. An LSP already has the experience and strategic vision to deliver an impactful solution for your SBA lending—and its bottom line value.
3. Continuity you can Count On
Many banks run the risk of their SBA lending services being interrupted because of “fair weather” dabbling. In other words, they don’t consistently do SBA loans, and subsequently have trouble bringing consistency and continuity to what is essentially an infrequently lending situation. That brings risk to all aspects of your bank: loan execution, lender reputation and compliance.
A lending service provider has consistent processes in place for helping your bank manage and administer SBA loans to small business clients. That consistency not only offers peace of mind, but also flows through as a competency indicator with your customers.
Here are a few of things to keep in mind when deciding whether to outsource a lending service provider. Structure your LSP agreement for maximum bank benefit: the relationship should include no minimum loan size, no fixed fees, and no minimum volume. These benefits allow banks the opportunity to organize and launch an effective and systematic SBA initiative with less risk, more profit and virtually no downside.