Handmade products hold a special allure, with their personal touch and craftsmanship setting them apart in a world of mass production. The global arts and crafts market, valued at $45B in 2024 and projected to grow to $74B by 2033, reflects the growing demand for such unique, personalized goods. Yet, even artisans benefit from streamlining their processes, using tools and systems to ensure efficiency without sacrificing creativity. This balance allows them to meet customer demands while maintaining the quality that makes their work special.Similarly, community financial institutions (CFIs) are adopting digital lending platforms to streamline their loan processes, bringing the same kind of precision and customer focus to business lending. These platforms save time, reduce costs, and provide small business customers with the convenience they expect. Just as artisans create value by harmonizing tradition with modern tools, CFIs can better serve their communities by blending personal service with efficient digital solutions. Digital lending enhances efficiency for CFIs and benefits small and medium-sized business (SMB) borrowers with faster, more reliable access to funding.Business owners enjoy the convenience and time savings of banking solutions that they can handle remotely and asynchronously, says Tyler Brantley, vice president of revenue and marketing at Accrue, a fintech service company. “The key to future growth is having a digital platform that gives a bank the ability to serve their customers where they are,” Brantley says.A Growing Lending MarketThe market for SMB loans is growing. In 2024, small businesses in the US borrowed $31B through 70K loans, a 13% rise in total value and a 22% increase in number of loans approved YoY. The Small Business Administration expects that the small business lending market will be worth $7T by 2032, for a compound annual growth rate (CAGR) of 13%.Even so, large banks only approved 14.6% of SMB loan applications, and 44% of SMBs don’t apply for loans because owners worry their applications will be rejected. The global digital lending platform market is also expanding. It was worth $7B in 2022 and is expected to experience a CAGR of 26.5% between 2023 and 2030. It will likely reach $20B by 2026, double its 2021 size. That growth rate reflects the growing lending market’s demand for an efficient, convenient lending process.
Benefits for Business Customers and CFIsDigital lending platforms give potential borrowers the convenience of applying for loans at the time and place that suits them, on whatever device they prefer. They can start a loan application on a laptop on a Monday morning and finish it on a smartphone over the weekend. Beyond the obvious advantage of making borrowing easier and more convenient for their customers, digital lending can also have a variety of benefits for lenders. These can include:
Benefits for Business Customers and CFIsDigital lending platforms give potential borrowers the convenience of applying for loans at the time and place that suits them, on whatever device they prefer. They can start a loan application on a laptop on a Monday morning and finish it on a smartphone over the weekend. Beyond the obvious advantage of making borrowing easier and more convenient for their customers, digital lending can also have a variety of benefits for lenders. These can include:
- Faster loan decisions that are less expensive to make. Digital lending platforms can save CFIs around 8 hours in processing time and as much as $4K per loan, primarily in reduced operating costs. Bank staff save time when they no longer have to manually input numbers, freeing them to do more interesting and potentially profitable work.
- More consistent lending decisions. Manual loan processes open CFIs to the possibility that human preferences will affect lending decisions. In one sense, CFIs are in business to make personal, human decisions. Relationships are at the core of their businesses. However, it’s still important to understand how a proposed loan compares to a financial institution’s stated risk limits, preferred loan conditions, and overall credit criteria. Digital loan platforms provide all of that. When bankers bend the rules, they do so deliberately rather than accidentally.
- A competitive advantage. A CFI that offers a more convenient and faster lending experience is one that is set to outcompete peer institutions with traditional, paper-based lending systems.
- Improved accuracy. Because information travels electronically on digital lending platforms, a digital lending environment offers fewer opportunities for manual transcription errors. These are frequent in more traditional lending formats. A 2023 Wolters Kluwer study found that 77% of automotive dealers and lenders that rely on manual loan processes have errors in at least one-third of their completed loans.
- Better compliance. The Section 1071 small-business lending rule from the Consumer Financial Protection Bureau is scheduled to take effect on July 18. It will require that financial institutions with large loan volumes collect and report lending information, as a way of ensuring that their lending practices are following fair lending laws. The same information can help smaller CFIs internally and with their own regulatory exams, helping demonstrate that they, too, are in step with fair-lending requirements.
- A dovetail with open banking. Digital lending platforms make it much easier to consolidate borrower data, including previous loans, outstanding debt, and credit scores.
- Better overall lending. A digital lending system simplifies everything from record-keeping to tracking client behavior and spotting market trends. It can help CFIs anticipate lending demand, develop new underwriting products, and even facilitate loan participation from multiple banks.
During the pandemic, many business customers appreciated the ease and convenience of digital lending platforms. Now, five years later, digital lending platforms are what customers expect. In addition to pleasing clients, digital lending platforms can offer CFIs faster, more consistent, and less expensive lending decisions; improved accuracy; better compliance; and a natural link with open banking, all of which add up to a better, more competitive lending program.
