How to Make Commercial Lending More Profitable

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Commercial lending has been a staple for most community banks but is it possible to make lending more profitable for the bank? Are most commercial loans priced too cheaply for small loans and too high for larger loans? The answer to both of these questions is “yes”.

Bank’s lenders need to know which customers are profitable and which ones are not. Does the type and size of the loan matter and how do you factor in the customer’s deposit relationship into the profitability equation? Do your bank’s lenders work for the customer or for the bank when it comes to loan pricing and whether or not to charge a fee? Well, we all know the answer to that question…they are working for the borrower and not for the bank.

A loan and deposit pricing tool will help banks increase net interest income and win more deals when in a competitive situation. Even though getting fees on loans is always a good thing do they really matter to the profitability of the loan? Of course the answer is it depends on the type, size, and term of the loan. Not many banks factor this into the equation.

Relationship profitability many times comes down to does the customer have multiple loans and deposits with the bank? Or, could I get a deposit account if I make a loan to a new customer. All of this is relevant but the type and size of the loans/deposits are critical. Are the deposits interest bearing or in an operating account? Are the customer’s loans small or large and how many loans are there?

Loan pricing tools have been around for decades and most large and regional banks use them. Strunk’s loan, relationship and deposit pricing solution is easy to use, affordable and your lenders will like the tool. Contact Strunk at 800.728.3116 or email me at info@strunkaccess.com to learn about how our loan pricing tool will increase net interest income by at least 25bp.

 

Grow Your Loan Portfolio with A Loan Pricing Tool

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Competition for “A” rated commercial loan customers is tough in many markets and a loan pricing solution might be the answer to win more deals. How many times has your financial institution lost a loan customer or have been told that “I can get a better deal down the street or from Farm Credit”. It doesn’t have to be that way.

Pricing loans that meet your profitability target can come with many different strategies that meet the borrower’s needs as well. What is the interest rate; what is the term; is it an adjustable or fixed; are there fees involved or not; what about deposits the borrower may have and are they interest bearing or in a operating account; does the borrower have other business with you. Why not give your prospective customer several choices that have the same financial result to the bank?

I have heard about everything…that our bank is “too small” or “Farm Credit’s interest rates are way too low” or “we can’t compete with the larger regional banks on rates”. Really? Why not look at a loan pricing tool that will help you price loans based on the entire banking relationship including other loans and related deposits. They are easy to use, easy to implement and your lending officers will like the flexibility they afford.

Start competing for larger loans, make smaller loans more profitable and get a handle on who your best customers are from a profitability standpoint…they are likely NOT the customer who has multiple loans with you as most lenders think.

To grow your loan portfolio by winning more deals contact Strunk at 800.728.3116 or info@strunkaccess.com to learn more about Strunk’s affordable loan pricing solution.

Spotlight On: FINSYNC

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FINSYNC is the only all-in-one payments platform that helps businesses get all their finances in sync, centralize control of cash flow, and get in sync with the right financial professional at the right time.

Grow in new and empowering ways when you combine innovative software with unmatched services.

FINSYNC’s payments platform helps businesses centralize control of payments, automate accounting, process payroll, and manage cash flow, and connect with members of the FINSYNC Network for banking, financing, accounting and insurance needs.

In his most recent annual shareholder letter, Jamie Dimon, JP Morgan Chase’s Chairman and CEO, called out the fact that software companies becoming banks themselves is an enormous competitive threat to our industry.

The threat is not new or news. The bold terms, however, coming from the largest bank with presumably the largest software development budget, make it worth every other community financial institution taking notice and action.

At Strunk, we want to help you to act and within your own budget. This is why we are calling out a special vendor we have been following. FINSYNC is helping financial institutions of all sizes compete for commercial/business relationships and win. Their program is not only unique on that basis alone, but it requires no upfront investment or integration and can deliver a quick return on time.

  • No cost to you
  • Acquire more customers
  • Increase revenue
  • Improve retention

FINSYNC helps financial institutions counter the threat that is now Intuit’s QuickBooks becoming a bank, which is by itself an enormous competitive threat to the all-so-important relationships you have with your business customers.

According to Dan Roderick, Strunk CEO, “The FinTech threat facing our industry is all too real. In my 40 years in banking I’ve never seen anything that has created a risk of this magnitude. Strunk is in the unique position of being able to bring solutions to our clients that will help community FIs combat the FinTech challenge.”

If you have not already partnered with FINSYNC or considered their program, please be our guest. We see this as a huge value to all of our clients and so we’re sponsoring a series of webinars so that you can learn more. Simply click here to sign up for a session that suits your schedule.

For more detail on the FINSYNC product please click here or email us at info@strunkaccess.com.

An independent certified public accountant has examined Strunk’s operations and found them to be in compliance with the AICPA’s Trust Service Principles. It was determined that Strunk meets the Security, Availability, Processing Integrity, Confidentiality, and Privacy criteria for SOC 2 established by the AICPA.