Source: Banking CIO Outlook Magazine - 10/15/2023
The Small Business Administration (SBA) loan has emerged as a crucial avenue for small businesses looking to expand their operations, attract new talent, and contribute to the growth of the American economy. A rising number of businesses are turning to SBA loans, and SBA lending is estimated to have one of its largest volume years on record in 2023.
While many businesses depend on SBA-backed loans, the industry, along with conventional lending, faces challenges when it comes to processing loans - a problem that iBusiness Funding is uniquely positioned to solve.
The Challenges in the Business Lending Space
Processing, underwriting and closing a SBA loan for a small business applicant is often akin to traversing a labyrinth. Financial institutions are not just assessing a borrower’s credibility; they’re also wading through a multitude of complexities inherent in the traditional underwriting and closing process. Some of the key challenges that lenders routinely face include:
1) Multiplicity of Stakeholders and Assets: SBA loans often involve a web of guarantors, business entities, affiliates, and collateral. A single loan application can involve dozens of guarantors, business entities with differing equity stakes, and a plethora of collateral ranging from real estate to equipment. Each of these elements adds a layer of complexity that lenders must sift through to make an informed decision.
2) Diverse Utilization of Funds: A great benefit of SBA funds is that they can be applied to numerous different uses—working capital, equipment purchase, real estate, debt refinancing, construction, and more. The versatile application of the funds means that lenders must analyze several different income and spending patterns for risk assessment, adding to the time and expertise needed for loan approval.
3) Time-Consuming Analysis: One of the greatest challenges is the time-intensive nature of loan processing. Lenders often face the daunting task of scrutinizing hundreds of pieces of documentation, from business plans and financial projections to personal financial statements and tax returns. The sheer volume of information can be overwhelming and time-consuming.
4) Profitability Dilemma on Smaller Loans: Given the extensive work involved, smaller loans often present a profitability challenge for lenders. The cost of the manpower, overhead, and time spent in analysing and processing these loans can outweigh the financial benefits, particularly for loans with lower principal amounts. This could discourage lenders from catering to small businesses in need of lesser amounts, thus limiting accessibility to capital for this segment.
These challenges underscore the urgent need for streamlined, efficient solutions in the SBA and also conventional lending space, a gap that iBusiness Funding aims to bridge.
The Solution: iBusiness Funding
At the core of iBusiness Funding’s innovative approach are two ground-breaking products designed to address the complexities and challenges of SBA lending: LenderAI and Lending-as-aService (LaaS).
LenderAI: The Self-Service Dynamo
Recognizing the need for an integrated, end-to-end SBA software, iBusiness Funding presents LenderAI—a self-service platform that provides comprehensive solutions for every stage of the SBA lending process. LenderAI offers 4 main modules:
1) Sales: Streamline lead generation and customer acquisition with specialized tools tailored to SBA and conventional loan marketing.
2) Underwriting: Navigate through the complexities of assessing creditworthiness and risk factors using advanced workflows, algorithms and data analytics.
3) Closing: Leverage automated workflows to expedite loan closing, ensuring that all compliance checks are met and documents are securely managed.
4) Servicing: Maintain loan accounts with ease using an intuitive dashboard that facilitates payment processing, risk monitoring, and customer communications.
Lending-as-a-Service (LaaS): Your SBA Lending Partner
For financial institutions that prefer to outsource the intricacies of SBA loan processing, iBusiness Funding offers its Lendingas-a-Service (LaaS) product. LaaS allows lenders to contract a significant portion of the SBA lending workload to iBusiness Funding’s seasoned professionals, while still maintaining oversight and control. Features include:
1) Turnkey Solutions: From lead acquisition to loan servicing, LaaS offers a complete package that frees lenders from the day-to-day operational challenges of SBA lending.
2) Expertise at Hand: Benefit from iBusiness Funding’s years of experience and compliance know-how. The LaaS team ensures that every loan is processed in adherence to SBA’s Standard Operating Procedures (SOP).
3) Powered by LenderAI: LaaS is a standalone service empowered by the robust capabilities of LenderAI, allowing seamless integration and real-time tracking for lenders.
By offering these two distinct yet complementary solutions, iBusiness Funding is effectively democratizing access to SBA loans—making the process faster, simpler, and more profitable for lenders while widening the scope of opportunities for small businesses in need.
The Secret Sauce: Tried and True Underwriting
While their products and services are leading the way, iBusiness Funding builds on a sound and proven foundation. Unlike most FinTech companies that reduce a business’s financial health down to a single numerical score, iBusiness Funding adopts a more nuanced, comprehensive approach to loan underwriting on behalf of its lender clients. This comprehensive view of a company’s financial health is critical to making sound lending decisions. Dozens, sometimes hundreds of documents like tax returns, debt schedules, financial statements, and projects must be taken into account effectively. This is where iBusiness Funding’s proprietary technology and models come into play to make collecting and analyzing these documents simpler and easier. As iBusiness Funding’s CEO Justin Levy explains, “We evaluate a business as a sum of all its parts, rather than relying solely on a single score to predict the risk for the entire business. Our technologies like digital document collection helps our clients get the data they need to make sound lending decisions without cutting corners. It is of course possible to use algorithms to predict business risk, and we have many that do just that, but the more predictive data you have to make a credit decision the better your risk adjusted return will be.” This meticulous approach not only benefits the lenders iBusiness Funding serves but, more crucially, enables the company to furnish capital to needy businesses in an efficient, transparent, and cost-effective manner.
The Future is Bright: iBusiness Funding’s Path Forward
iBusiness Funding is in a rapid upward trajectory with no signs of slowing down. In just three short years, the introduction of their LaaS product has already had a transformative impact on the industry. On pace to process $200M in SBA loans for their clients in 2023, iBusiness Funding has not just adapted to the ever-evolving landscape of SBA lending; they have become a dominant force shaping it. Additionally, LenderAI has seen exponential adoption rates, quickly becoming a cornerstone tool for SBA lenders who prioritize speed, compliance, and efficacy. Their work has been instrumental in catapulting ReadyCap Lending, the Small Business Lending Company (SBLC) of Ready Capital Corporation, into the ranks of the top 5 SBA lenders.
But what sets iBusiness Funding apart is not just their phenomenal growth or the cutting-edge products they offer. It’s their unwavering commitment to innovating and fine tuning their services, always with an eye on simplifying and accelerating the lending process for both lenders and borrowers. The blend of technology and personalized service, exemplified in their approach to comprehensive loan underwriting, highlights their readiness to meet the unique challenges of the SBA lending industry.
CEO Justin Levy adds, “We’re extremely proud of what we’ve accomplished so far, but we’re just getting started. We’re continually pushing the boundaries of what’s possible in the SBA and conventional business lending space. As the needs of small businesses and lenders evolve, so too will our technology and services. We’re here for the long run, and we’re just getting started.”
iBusiness Funding doesn’t see their current success as a final destination but rather as a promising launchpad for future innovations. As the market continues to grow and evolve, so too will iBusiness Funding. Their ongoing investments in technology, combined with a profound understanding of both traditional lending and FinTech, ensure that iBusiness Funding is not only prepared for the future but is actively shaping it.
In a rapidly changing financial world where the only constant is change, iBusiness Funding stands as a beacon of stability and innovation. With a track record of impressive business growth for both their LaaS and LenderAI platforms and a commitment to continual improvement, there’s no doubt that iBusiness Funding will continue to revolutionize the SBA lending landscape well into the foreseeable future.