Digital Lending Case Study: Small Business Loans

Findings from ABA Research

To learn more about how banks are moving away from paper-based lending processes, the American Bankers Association conducted a survey, drawing responses from nearly 200 banks. The resulting report, The State of Digital Lending, provides a new window into the current landscape in digital lending.

Here is a case study of one bank that partnered with fintech to expand its digital lending capabilities.

Small business lending at Burling Bank takes a cue from the trading community.

Founded in 1989, Burling Bank is a privately owned community bank in the heart of Chicago’s financial district. The bank offers a full suite of products and services. Rooted in the trading community, Burling Bank has taken lessons from the digital transformations that have taken place there.

“We’ve seen innovation disrupt the trading community, our niche market in Chicago,” said Andy Goldberg, chairman. “Trading became digitized, with varying levels of automation, creating wide distribution of information and access, providing risk management benefits—and a more consistent approach. Following that lead, we have deployed complementary digital services—such as online banking and mobile banking—to extend our reach to clients.”

Goldberg added: “Then we asked, ‘Can we deploy technology to augment business development efforts, attract more small business loans, and create efficiencies internally?”

There were pressures to do so.

Burling Bank had always competed with banks of varying size and capability. Now it faced new competitors such as non-bank lenders who offered the convenience of rapid application and response—albeit at high interest rates. If the cost of managing small to medium-sized enterprise (SME) loans could be controlled with process efficiencies, Burling Bank could retain and recapture some of that business.

Burling Bank engaged Akouba, a fintech that has developed a digital lending platform for regional and community banks. The software enhances the efficiency of the bank’s small business lending and underwriting process. That includes tasks such as:

  • Pulling credit reports
  • Gathering financial statements
  • Sending reminders to applicants

Burling Bank holds the loans on its books, and underwriting is based on the bank’s criteria.

“Akouba is a digital complement to the relationship we have with our clients,” Goldberg said. The platform “allows us to layer our own criteria, developed and refined over our nearly 30-year history, rather than direct us on how we should be evaluating opportunities.”

Goldberg explained that the technology’s ability “to integrate with other vendors, such as our core provider and loan document vendor, brings consistency and efficiency to data collection, internal analysis, and output. Finally, Akouba’s ability to white label its product makes it versatile enough to be used by different banks that have different specialties and appetites.”

Meeting the special challenges of community banking and the regulatory environment.

A key consideration for Burling Bank was finding a tech partner that understood community banking and the regulatory environment. “The team at Akouba is an incredibly bright group of folks who, for non-bankers, truly understand the challenges in the banking environment. They do a very good job listening to what we need and have been partners in developing the program that meets the needs of the bank.”

The first benefit seen is an improvement in consistency. As Keven Murphy, the bank’s chief lending officer, explains it, the platform “steps borrowers through the process like doing TurboTax, prompting for information in a way that will make it more consistent and useful to the bank in making underwriting decisions.” A streamlined application process also enables the bank to review more loans.

Implementation required little involvement from IT, said Murphy. “Basically it was just making sure the Akouba platform had access through our firewalls. Since Akouba is a web-based program, it’s as easy as getting a website address and a login for the bank and the client. The only time we needed to involve IT was in integrating for our documentation system. It has been very, very user-friendly.”

Feedback from users has been positive, said Murphy. “Clients that have used it thought the portal was easy to navigate. They didn’t have any issues getting in and using it independently, which was great. They were timely in getting the information in, and everything went well. We have not had any negative feedback.” He reports that though their sample size is small, but everybody who has used the platform has been very satisfied.

“There’s definitely a need for this type of digital process automation in the marketplace,” Murphy said. “The traditional process takes a lot longer than it should. We’re trying to shorten that duration through efficiencies, technology, and the ability to minimize duplication in what we’re doing with systems and processes.”

Download the full report.