In today’s highly competitive banking world, smaller financial institutions are sharply focused on shareholders’ expectations for growth in earnings and return on equity. How can smaller organizations support earnings and ROE growth in the face of intense regulatory scrutiny and competitive pressures on profitability? One of the best ways is by leveraging their strengths in relationship lending, and their access to technology in order to grow the small business loan portfolio profitably.
U.S. small business lending is a $700 billion business, serving more than 29 million small businesses. The three major lending groups that currently serve small businesses are large banks, community banks and a more recent entrant to the lending sector – online alternative lenders.
Community banks, those with assets of less than $1 billion, have historically been a step ahead when it comes to fostering relationship-based lending. They are relationship bankers, characterized by local ownership, control and decision-making. They can make lending decisions based on personally knowing the character of the borrower, the collateral and the needs of the community.
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