Banks and lenders may have been historically resistant to adapt technology, but they’re catching up at the community banking level in droves. The shift of consumer and business expectations around tech continues to rise alongside innovation and increased product diversity. 

Commercial lending may have an abundance of players on the field, but they are typically smaller compared to their consumer-oriented counterparts. There are more consumers than there are businesses, leading to higher levels of tech adoption and investment. 

Michael Barnett, Founder and CEO at Loanspark, is on the front lines of providing high-touch service while bringing efficiency to company processes and introducing streamlined systems in the commercial lending space. 

Innovation for innovation's sake can cause more problems than it solves. There must be a consideration for the end goal, and Barnett is dedicated to positive progress based on real needs.

The impact of customer preferences on the lending process

As a platform company, Loanspark is a private, white-label provider of lending products that partners with a wide range of companies with a diverse set of end customers.

“What a bank's customers look like may be different than what a subprime payment processing company's customers look like,” Barnett said. “The reason that's important is because our products are very generalized. We have a product to fit almost every commercial use case.”

From unsecured or secured collateralized transactions, term loans secured or unsecured, commercial real estate transactions, equipment, lease transactions and factoring — Loanspark runs the gambit and adjusts strategies accordingly, offering a “Jack of all trades” experience.

How product focus has shifted in recent months

Over the last 24 months, commercial lending has seen a significant increase in demand and request for line of credit products versus traditional unsecured term loans, alongside demand for SBA products. 

“We believe that the reason for that has to do with the general increase in rates,” Barnett said. “It doesn't mean that SBA loan rates haven't gone up. But as bank rates have gone up, it makes SBA loan products a little more attractive.”

They trace this increase to the high level of documentation needed for pre-approval included with SBA loans. 

Regarding line of credit products, approximately 45 percent of businesses they see applying, getting approved and then executing an agreement on a line of credit product are not drawing on those lines. Considering this, it follows that companies may see these lines as “rainy day funds” based on the direction of the economy — a type of security and a way to get ahead of liquidity issues.

“If I was operating a small to medium business, and I didn't have a line of credit, I would strongly consider applying for one right now,” Barnett said.

Specific product type perseverance aside, consumers and businesses alike are also developing new expectations around available tech and its place in lending.

The role of technology in high-touch communication

One of the main draws for tech adoption is the positive effect on profit. The more a company automates, the more it makes per transaction. But implementing technology for profit alone isn’t always the best option. 

“We use technology to do the heavy lifting part of our processes, and we use our humans to do the thinking part of our processes,” Barnett said. “In commercial lending, there's, traditionally, a very high touch process. Our customers can choose whether they want an online process where they can manage everything inside of a portal or have a hybrid process.”

They’ve seen that around 95-97 percent of clients choose the hybrid, high-touch method, where they can use the tech and speak to a human, as opposed to only online service.

Loanspark agents reach out proactively and intentionally to make contact with clients to build the relationship and educate and inform the client about what they offer and what they've applied for, ensuring that what they're applying for matches their approval allowance.

After the consultation, they guide the client through the necessary steps specific to their situation, considering the many nuances across differing properties and loan types.

“What we find is our business owners feel more comfortable when they're speaking to a human because of the complexities of the transaction,” he continued.

The level of care and attention needed in the front end of commercial lending is a perfect example of when high-touch communication is preferable for all involved. 

How technology supports low-touch communication

In the back end, clients prefer a more unattended flow for finalizing and accepting a transaction. Once all the pieces are in place, busy business owners want to dot the last I’s and cross the final T’s as smoothly as possible, on their time.   

“When we look at text messaging as a communication vehicle, we're probably using text messaging 80 to 90 percent of the time to communicate with our applicants versus an email or even a phone call,” he said.

While email takes on the document transit load, texting swoops in to handle the general communications and provides flexibility for clients.

He continued, “I would recommend business operators in the industry that we're in; if you're not using text messaging, it's a huge benefit — consumers like it, that's how they want to communicate.”

However, all the tech in the world cannot replace good customer service, whether it’s direct to consumer or commercial. Business owners are consumers, too, and they hold the same regard and desire for human connection shared across all sectors. 

Providing a consistently satisfying customer experience takes dedication to speed, good service, and accuracy. Tech is the cherry on top of those pursuits.

Stay tuned for new episodes every week on the Leaders in Lending Podcast.