Banks have an array of challenges in the commercial finance arena, but one standout issue is investing in the right opportunities, both from a lending and infrastructure perspective, while trying to understand when the uncertain economic seas will calm and how the landscape will look afterwards.
It is going to be hard for banks to attract, evaluate and monitor good credit opportunities since the environment for small business and commercial loans has taken so many different turns lately. Loan officers will likely continue having difficulty getting internal and external support for commercial lending from bank management until the number of quality borrowers increases, which, as history has taught us, will eventually happen.
In the meantime, it is extremely important for bankers to have a complete understanding of the ramifications of their commercial lending efforts for two primary reasons. First of all, garnering more complete, consistent and current information (the "three Cs" of data) about a borrower's character, capacity and collateral (the "three Cs" of lending) will translate into more confident decisions with a higher probability of repayment in difficult economic times. Additionally, good data will help lenders increase loan portfolios by sourcing new deals based on trends they see in their own portfolios or by more effectively cross/up-selling to their solid clients. Secondly, organizations that focus now on ensuring they have solid, quality and efficient processes will be best positioned to handle opportunities from either weak or failing institutions while economic conditions continue to languish and from new business needs as conditions recover. Therefore, the time is right for banks to consider process improvements and deploying end-to-end processing to address the following needs:
- Accessible data to help prevent credit crunch issues in the future. The key is implementing the technology before major shifts such as an economic upheaval or, more importantly now, economic recovery, occur.
- Informed focus to take advantage of lending opportunities and to move credit portfolios forward. Additionally, both credit-worthy and troubled borrowers would be easier to manage with this technology. It will make the risk managers more comfortable with associated risks because they can see the performance of the loans at any time.
If processes and quality systems containing complete, consistent and current data are not employed now, the industry may be doomed to repeat history in the future. Also, hesitation by bankers that halts forward progress on process and technology improvements because they lack confidence in the economy and political environments may end up costing more in the mid- and long term as a result of current quality-missed lending opportunities.
Sincerely,
Hunter Brink
Executive Officer
Remington Capital Inc.
(480) 248-9152 :: hunter@remingtoncapitalinc.com
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