You’ve heard the message loud and clear, and the volume on the message has only cranked up over the past couple of years: diversify your product offerings, diversify your geographic footprint. But this is easier said than done. As a bank, how do you boost your institutional lending capabilities without losing depositary business or putting your own reputation at risk?
Let’s get a little more specific: You have a small business client. They’ve been renting a retail space for years. Given current rates, you both realize it would be more cost-effective for them to buy their current building. To get the business done, you partner with a non-bank lender that both understands the needs of an SBA borrower and specializes in commercial real estate lending.
The result for your client is that you are demonstrating the ability to meet their needs as they scale which gives them abundant reason to stay with you. The result for you is that your institution is realizing true lifetime value from the relationship.
But we heard you on risk. You’ve built your success on your financial institution's core competencies. Expanding to highly specialized new products can expose you to new risks when the climate already feels risky.
If you bear with us, we’ll explain how working with a non-bank lender can help you expand your institutional lending capabilities and create new revenue streams without disrupting what you’ve already built.
Role of the non-bank lender
Financial institutions and individuals come to non-bank lenders when the former comes up against a barrier that prevents them from serving their clients. The barrier could be that their client’s borrowing needs fall outside of the financial institution’s credit box. Or their client wants to do business in a geographical area that the institution’s not licensed to cover. Or the client needs a loan that’s too big or too small, and there’s no Goldilocks solution in-house.
Some quick facts about non-bank lenders
- They are not subject to the same regulations as banks.
- With this comparative freedom, non-lenders have a bigger lending box with more paths to success.
- They are non-depository, so you can keep doing your core business and simply augment your offerings leveraging the non-lender's unique capabilities.
That being said...
… not all non-bank lenders are created equal
Non-bank lenders often can help you get a deal done when every other path is closed. But that doesn’t mean that the experience will be the same wherever you take your business. Here are two scenarios you can encounter with non-bank lenders that should signal “next” during the evaluation process:
Scenario 1: Inflexibility on credit score, contracts
Some non-bank lenders don’t care about the credit score you bring them and will give you a one-size-fits-all rate for your client’s loan. The best will take the score into account and offer you a rate that aligns with your client’s credit worthiness.
And on that subject of inflexibility, some lenders have a minimum number of referrals and contracts that box you in. Working with a non-bank lender should never limit you since limitations were what brought you to the non-lender's door in the first place.
Scenario 2: Inattention because they’re someone else’s client
The best non-bank lenders will treat your clients exactly as you would. They will give a quick “yes” or “no” so that you and your clients don’t miss a beat in your process. At Ready Capital, for example, if it looks like a deal can be done, we aim to have a term sheet within a week. If it doesn’t look like we can meet your client’s needs, you will know quickly. We will never pull the rug out from under you 60 days into the process, setting you and your client back.
Bottom line: the best non-lenders will help boost, but never hurt, your reputation.
Building on your bank’s core business
Your core business engine is accounts, and there is healthy competition for those accounts. There are several ways that working with a non-bank lender can boost your core business. A non-bank partnership means you can:
Widen your net with access to a larger set of lending solutions
With a dependable referral relationship in place, your reputation for scalability will open you up to new depositary client acquisitions with an eye on both the near and long-term needs of their business.
Enjoy new deposits, cash management, and CRA credit opportunities from business owners
With the expansion of your client’s own enterprise comes the potential for new deposits and your expertise in helping manage cashflow.
Offer more CRE lending products (beyond SBA) from a reputable source
Your clients may need to build a warehouse, purchase equipment, or buy out a partner. You can funnel them directly to a top non-bank to find out if they qualify for the loan they need and move on quickly if they don’t.
Efficiency and transparency in referrals
Quick referrals and credit decisions are key in creating the experience your clients expect today. According to Qualtrics Global Consumer Trends 2022 report, 8 out of 10 customers surveyed believed the customer experience could be improved with a particular focus on areas such as product capabilities, prices and fees, customer service, and ease of use.
At Ready Capital, our place as one of the top non-bank SBA and CRE lenders in the U.S. has been earned one relationship at a time. We are only as successful and satisfied as you and your clients are. We aim to help you expand your product mix and we place a high value on transparency. Though our lending toolbox allows us to find creative solutions to get to that elusive “yes,” we don’t mind giving a quick “no.”
And while some lenders will try to push payroll, insurance, and other products onto unsuspecting customers, we can’t and wouldn’t. We don’t offer any products other than loans.
Our staff also makes it easy for bankers to stay connected to the loans we create.
Is a bank-to-non-bank relationship transactional or consultative?
The best bank-to-non-bank relationships should be highly consultative, delivering a range of solutions to the bank’s clients without infringing on the original depository relationship.
For example, if your bank has legacy SBA portfolios that turned out to be too specialized or generated too little business to keep afloat, a top non-bank partner will help you service those loans (not just say they will, but actually follow through and provide the solution). This partnership will allow you to continue to offer a solution to customers that they’ve come to expect while you focus on growing your core.
Low-risk, high-growth solution for banks
Ready Capital is one of the nation’s top non-bank lenders with preferred status and expertise in both small business and commercial real estate. We understand each step of the customer journey and your role as a business development officer, ABL, or other advisor in helping small businesses win while growing in tandem with them.
For bank business development officers (BDOs)
- We offer referral fees among the highest in the industry
- We offer preferred rates on better credits to win deals
- We won’t bruise relationships by cross-selling other products/services
For the financial institution’s profitability
- We offer a significant stream of referral revenue from opportunities otherwise being turned away
- We help you keep customers from leaving for competitors who will seek their deposits
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