Suntell CEO Corner
In my last quarterly issue, I admonished commercial lenders and institutions for their treatment of the commercial lending process as a ‘sacred cow’: not to be touched or disturbed. This leads to out-of-date and inefficient commercial lending origination and servicing. Data and information are found all over the place; between Excel and Word files, core accounting systems, stand-alone solutions, desktops, etc. While this process remains unchanged and familiar, this approach to commercial lending is costly and time consuming; reducing your institution’s competitive edge, customer responsiveness, and ultimately overall profitability.
On the other end of the spectrum is “Fintech” and the emergence of Fintech application and Fintech lenders. These Fintech lenders are mostly alternative or non-traditional bank lenders. I have discussed in my past articles how these lenders are utilizing digital platforms to attract loan applications online and returning automated decisions on applications in minutes. Commercial banks are beginning to join the fintech approach. U.S. Bank just announced their fully digital option for small businesses to apply online and receive a loan or line of credit up to a $250,000 the same day. Often, this offering is touted as being “in an hour or less” and the loan closed electronically. This evolution of digital lending and Fintech has caused most institutions we work with directly to evaluate their own role and desire to play in this arena.
My past experience as a banker, bank consultant, and bank software owner, has given me some pause on this emerging digital trend for commercial lending. While I have concerns regarding credit risk and exposure, it is something we continue to evaluate within Suntell.
In the 22 years since founding Suntell, you have never heard me or others in our organization advocate abandoning tried and true commercial and agricultural analysis: credit risk management. We believe it begins with a human touch, human relationships, evaluation of human character, staying in your own backyard, and so on. Online applications and a machine decisioning algorithm that determines the merit of a commercial loan application without involving these other factors has caused me concern.
It is with this determination to stick to commercial and agricultural origination analysis and servicing fundamentals that was the genesis for branding our loan management system the ‘Square 1 Credit Suite’ in 2009. We believe commercial and agricultural lending fundamentals will always cycle back to Square 1. I have seen no fewer than three major economic cycles since I entered banking in the early 80’s. There will likely be more in the future. What I have preached over the last three decades is that applying commercial and agricultural analysis in a manner that moves the needle from the far edges of the spectrum in outdates processes or automation that excludes human interaction. The best practices lie in the middle of the spectrum: having one data system connected to your core and document prep systems to efficiently originate and service commercial and agricultural loans.
Keep in mind that this type of lending is not cookie cutter lending. It requires a trained analyst, commercial loan officer, and loan committee to evaluate credit risk and to determine the correct terms and conditions on a case by case basis. There is no reason, however, it should be accomplished in a time consuming and inefficient manner.
With all of that said and my reservations on the trends toward digital lending, I also recognize we have to continue to be responsive and invest in the Square 1 Credit Suite to meet the needs of our customers and market trends. Evaluation of the next areas of our development focus is something we do annually. We pride ourselves on listening to our customers and adding new features to meet emerging trends, or sometimes expanding existing features to make them better. While digital lending is the buzz and the trend, our innovation and investment will always be directed toward solutions that continue to make the commercial loan origination and servicing more efficient to complement trained human evaluation and expertise.
That is why we approved allocated development and company resources to the development of our automated tax return reader technology to feed tax return schedules into the spreads within Credit Analysis. This is a system that will be unveiled in stages, beginning with testing in Q4 2018 and into the first half of 2019. In addition, there is a demand to deliver our software in a cloud environment as cloud computing and applications become more accepted by financial institutions. We are in the initial stages of our first cloud hosted installation of Square 1. This alternative approach to Square 1 delivery once proven, will be become more widely adopted with each passing year. These are just a couple of examples of how we are adapting to the changing world around banking and commercial lending.
In closing, 2018 is rapidly drawing to a close. We appreciate your business and your feedback and support along this topic or others as we continue to evaluate future trends and meet customer needs.