Turn Small Business Loans Into Big Profits
Turn Small Business Loans Into Big Profits

Turn Small Business Loans Into Big Profits

According to a report by the National Small Business Association, 27% of small businesses were unable to obtain adequate financing in 2015. While not every small business owner is an ideal candidate, many eligible applicants are still being turned down by community banks. Why are financial institutions shying away from this loan income when so many businesses need the assistance?

If your bank isn’t prioritizing small business loans, you could be missing out on a potential source of revenue. Online platforms that specialize in small business lending have been popping up in recent years and are gaining the market share that community banks lose because of their reluctance to lend to these business owners.


Two Reasons Small Business Loans Aren’t Being Prioritized


Some institutions perceive that small business loans take the focus away from larger loans they’re administering. About 80% of small businesses want loans below $500,000, but because it costs the same to underwrite a $1 million loan as loans under $500,000, larger loans are more profitable.


Breaking Into The Small Business Sector


Funding small businesses can help your bank build trust and credibility with new consumers in your community. You could even highlight your involvement with, say, a window sticker that says, “Funding for this business provided by….”

By making these loans, you’re also investing in the future of your community. If successful, these small businesses will grow and need more employees. Job growth, in turn, drives housing and population growth, which leads to more potential consumers in need of your accounts and services.

One way to break into the small business sector, appoint a small business leader at your institution, who owns and is committed to your small business strategy. Having a leader ensures this becomes a real initiative at your institution rather than something that gets added as an action item to a strategic plan and then is never prioritized.


Another Source Of Income: Small Business Employees


While small business loans can be a viable source of income for your institution, there’s also an opportunity to offer personal products to the employees of small businesses you loan to. Bank-at-work partnerships provide employees with a convenient way to conduct financial business at the workplace and deliver advantages to the employees of your small business clients.

Business owners get benefits too! Perks for them include increased participation in direct deposit, improvement to the employee benefits package (which appeals to potential recruits), and saving employees time and money without affecting the company’s bottom line.

A bank-at-work program is easy to implement. Your small business leader will go to each business and speak with employees about what the program can offer. Enrolled employees receive perks for banking services like free checking and savings accounts, consumer loan discounts, and cash rewards. You could also offer seminars where a representative from your institution teaches employees about financial wellness on a recurring basis.


Closing The Gap


Not every small business that applies for a loan is qualified, but with more than a quarter of them unable to obtain the funding they need, community banks are obviously not connecting well with those who are good candidates. Taking the steps to close this gap and providing loans to more eligible businesses can undoubtedly have a positive impact on your institution’s profits and your surrounding communities.

What’s Kasasa?

Kasasa® is an award-winning financial technology and marketing services company dedicated to helping both community financial institutions and consumers experience what it means to "Be Proud of Your Money." We're known for providing reward checking accounts consumers love, the first-ever loan with Take-Backs, relationship-powered referral programs, and ongoing expert consulting services to community financial institutions.

By working exclusively with community banks and credit unions, Kasasa is helping to strengthen local economies across the nation, building a virtuous cycle of keeping consumers' dollars where they can do the most good. Our mission is to power a network of financial institutions in all 50 states offering products and services that are clearly beneficial for the consumer and the institutions offering them.