Banks court credit-hungry small firms with loan decisions in mere minutes
Some lenders turning to new systems to expedite approval process for group
Small businesses in Canada grew hungrier for loans in the third quarter — and some of the biggest banks are trying to make sure they get them as fast as possible.
Earlier this week, The Bank of Canada reported that its latest survey of senior loan officers found that credit conditions for small businesses hadn’t changed, but that the appetite for loans among those smaller firms had increased.
“Greater demand was reported across all regions from small business borrowers,” said the survey, conducted between Aug. 6 and Sept. 7.
Interest among small businesses for credit has picked up as the average consumer has already managed to amass a relatively large amount of debt, potentially leaving them less room to borrow from the big banks. Some lenders, meanwhile, have been busy building new systems to expedite the loan approval process for small businesses.
The newest offering, announced on Wednesday by Bank of Montreal (during Small Business Week), is BMO Business Xpress, which was made in-house.
According to the bank, the small business-specific lending “platform” allows it to cut the time it takes to approve loans from weeks to minutes.
“The analogy I would use is that it’s going from analog to digital,” said Arun Kumar, the head of small business banking at BMO, in an interview.
“Rather than having individuals extract information from selfdeclared sources, such as financial statements and underwriting transactions, what this platform does is it actually taps into and harvests certain data points that we think are important, and basically automates the process so that we can actually make decisions in a matter of minutes.”
According to Kumar, the bank “harvests” this data about applicants from multiple sources, such as credit agencies.
BMO isn’t the only bank trying to find new ways to speed up its dealings with small businesses.
Quebec-based National Bank of Canada announced something similar in September: a strategic partnership with fintech Thinking Capital that would allow small businesses to apply for a loan online “and receive a decision in just a few minutes.”
“National Bank will use Thinking Capital’s proprietary fintech platform — which embraces artificial intelligence and proprietary algorithms to make lending decisions to streamline the process of evaluating (small and mediumsized enterprise) loan applications and ultimately qualify applicants more quickly and easily than previously possible,” the bank said in a release.
The apparent attention paid to small business extends to basic banking as well.
Recently, Canadian Imperial Bank of Commerce launched a new “advanced business operating account” that boss Victor Dodig said offers small businesses Interac etransfers, as well as “low monthly fees, and the most competitive fee waiver option in the industry.”
“We’re seeing good growth in personal and small business banking over the full year,” added Dodig during his bank’s August conference call.
As of the end of last year, Canadian lenders had authorized more than $225 billion in credit for small and medium-sized firms, defined as having authorized borrowing of under $5 million, according to the Canadian Bankers Association (the total loan amount of eight of Canada’s largest banks was more than $3 trillion at the end of their 2017 fiscal year, CBA stats show).
“Over the years, this segment has been underserved, not just by us, but by the Canadian banks in general,” Kumar said.
Canadians may also be feeling more entrepreneurial of late, motivating the banks to tailor their offerings accordingly.