The COVID-19 has a significant effect on the markets and our current economy. If the situation continues, we might see once again a period of depression and economical stress, similar to what most of us remember from 2008.
In this environment, credit and access to commercial loans for large, medium or small businesses become scarce. In the 2008 crisis, we witnessed the rise of 'Lending Club' and 'Prosper' who were skilled in harnessing technology to better protect themselves from high default rates, reduce the time and costs of underwriting for consumers and that allowed them to operate and grow in a market everyone else was quick to run out of. If the crisis hits us in the US as it progresses through China and Europe, we expect to see the commercial lending market paced with the same challenges consumer and property financing faced in 2008.
Even pre-COVID-19, 50% of SMB's did not have access to credit, and 75% of them stated they lack the credit access to grow their business. If more banks and lenders go on the defensive and pull out, we will see a rise in the number of businesses defaulting and businesses looking for credit.
As a community bank, you will need to decide if you want to carry on with traditional methods and cut your exposure dramatically or use this opportunity to accelerate your advantages and grow your business and market share. Today, using technology, we can improve our internal processes and therefore lower underwriting costs, provide quicker response times and use tools to handle a rapidly changing market. We also need to have an automated risk model that can be flexible and react to dynamic changes. The ability to protect and predict defaults faster than the competitors, will allow you to grow your market share safely, and provide excellent service for your clients.
With new platforms, we can connect directly to the SMBs accounting system, and as a true partner, understand their business, feel the business's pulse and react quickly to support their growth, match the right financing vehicle for each situation and support the business owner.