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This article was originally published on Forbes.com and is republished here by the permission of the author.
You might think this is an overstatement, but times are changing and the above headline might not be as much hyperbole as you think. So far as small business banking is concerned, I’m convinced it’s true for the traditional approach to business lending. Small business lenders can’t afford to do business the same way they did 10 years ago and hope to stay relevant much longer.
It’s no secret the last 10 or 15 years have been tough for community bankers, as their ranks have diminished. One of the traditional roles these bankers play in their respective communities has centered on their partnership with the Main Street businesses that help local economies thrive and grow.
Unfortunately, small businesses have suffered right along with their banker partners as regulations and restrictions seemed to clamp down on small business credit. The credit crunch that started in 2008 made it difficult for bankers to partner with the smallest businesses in their community, which has cost jobs and hurt local economies.
“I fired all the bankers.”
Nevertheless, despite the regulations and the inherent risk associated with young Main Street businesses, the real challenge facing community bankers is the old paradigm many still use to inform how they do business in an age when the market is clamoring for something different.
Not long ago I had an interesting conversation with a Vice President of a bank that is very actively lending to small business. He is extremely focused on making the business loan process easier for his customers and more profitable for his bank. I was surprised by his comments. You might be too.
“When we really started to have success is when I fired all the traditional ‘bankers’,” he said. “and hired traditional ‘sales’ professionals to replace them.”
He argues salespeople make better loan officers because they operate from a different point of view than traditional bankers. I think he may be right (and it’s hard to argue with their results — they are one of the largest and most active SBA lenders in the country).
That’s not to say there aren’t a lot of highly-qualified loan officers who are doing great work today, but I’m convinced those that stand out, whether they are aware of it or not, are those that approach the small business loan process like a sales cycle. Here are just a few of the traits I think exceptional loan officers have that look more like professional sales skills to me:
My friend (the VP at the bank mentioned above) opted to replace his bankers with salespeople to encourage these (and other sales-related) traits within his small business loan department—a drastic move that seems to be paying off for him. Whether or not you opt to follow suit, the small-business banking environment is not the same as it was prior to 2008 and bankers need to look at the market from a different paradigm.
Non-bank, online financial services companies are aggressively pursuing many of the small business customers traditionally served by community bankers. Over the last couple of years I’ve also noticed bankers interested in doing more small-business loans are utilizing many of the techniques used by their non-bank colleagues and creating new loan products to compete with non-traditional lenders. Some are even acquiring alternative lenders to add their loan products and incorporate their sales techniques.
The traditional approach to small business banking may not be dead yet, but it’s definitely on a respirator. What are you and your bank going to do about it?
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I'm the CEO of Lendio, and my passion is to make small business lending simple for the 30 million Main Street businesses across the USA. Thankfully, we are growing rapidly by helping over 100,000 small businesses each year get matched to a lender to start or grow their business. As an entrepreneur, I've raised over $10M during my career. I believe that successful companies start with passion to solve a major problem, great teams, and a superior company culture. While business accomplishments can be a nice ego boost, my most important accomplishments come from being a husband and father of 3.
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4 min read • Aug 11, 2022