How APIs Can Help Traditional Lenders Speed Up Credit Underwriting Process For Small Businesses

1. How APIs Can Help Traditional Lenders? Speed Up Credit Underwriting Process For Small Businesses! Worldwide, the demand for small business loans has increased at an alarming rate. This presents both new opportunities and formidable challenges to traditional lenders as well as small lenders. Small business credit underwriting is a tough market for both large and small lenders. Traditional bank lenders are challenged by small lenders because of their agility and aversion to lower risk. Small lenders are fierce competitors for their advantage by offering fast service and taking less risk. Lenders who are able to quickly find the right formula for credit underwriting without having to compromise underwriting criteria will have the best chance of growing their credit portfolios.

2. Growth in Small Business Lending Small business lending is a sector of finance where demand and supply seem to work in tandem. The strong demand for small business loans encourages the entry of new lenders as well as the development of other lending sources. This has led to an increase in credit availability, which is encouraging more small-business growth. Favorable economic conditions are driving demand for small-business loans and increasing the opportunities for loan underwriting. The latest NFIB Small-Business Optimism Index found that 29 percent of respondents to the survey said they would consider expanding their business during the third quarter of 2018. This was due to the improved employment market and credit availability. These data reflect a need for small-business funding that has been present for many years. According to the Federal Reserve Bank of Cleveland, nearly half of small business owners seek additional capital every year for expansion or operations. Many fail to obtain loans due to a variety of obstacles. These include difficulties with traditional bank lenders and a dearth of reliable alternative lenders. Small Business Loan Underwriting Problems Although traditional bank lenders enjoy a good reputation for their stability and security, they are at a disadvantage in small-business lending. Traditional banks tend to have a slower adoption rate of flexible data management and customer management programs than alternative lenders. Many of these alternative lenders start from the ground floor, with the most recent FinTech solutions in place. Traditional lenders are generally more cautious than other lenders. This is partly due to the strict regulation of the banking industry. Partly this is because banks are unable to assess the creditworthiness of potential borrowers using more data. Borrowing through traditional lenders can be slow, tedious, time-consuming, and requires too much paperwork. Although the big banks are seeing a rise in loan growth, there is still a large gap between traditional and alternative lenders. According to the Biz2Credit Small-Business Lending Index, 26 percent of all small and medium business loans submitted to large banks in the U.S. were approved in June. This was an increase over previous months. However, the approval rates for small businesses at credit unions and smaller banks jumped to almost 65 percent.

3. How APIs Can Help In Credit Underwriting Companies can have instant access to their customers' banking data via accounting and financial data APIs. This allows them to verify their credibility and see their financial stability. Lenders can now make faster decisions based on data and perform risk assessments.