How to Increase Profitability of Commercial Loans at Banks

According to The World Bank, efficiency and speed directly relate to bottom-line profitability of commercial loans at banks. Without a robust data collection tool, an efficient automated credit scoring system as well as competitive lending rates, lenders can and will notice a significant drag on a bank’s earnings.

Data not information must be used as a tool to quickly and objectively measure credit risk. To effectively manage risk, banks must first collect and manage data in order to establish characteristics.  These characteristics are then used to predict outcomes to manage bad debt or debt that will be eventually written off.

The speed at which an institution can complete this critical analysis is paramount to increase profit.  Once complete, lenders can develop a robust scoring model which leads to automation, consistency, improved information management and customer retention through sales of alternative products.

Without a qualified team of underwriters and processors the automated scoring process cannot be used to its greatest potential.  A qualified team will have underwritten or processed at least 50 SBA loans in their career.  Although salary costs might be high for an experienced team, production relative to department costs will be acceptable.

It is also important for banks to offer lending rates that attract the kind of credit exposure the bank is seeking, not only what the market will bear. This model includes alternative products that can include restructuring which support profitability.

Banks who can quickly and efficiently predict outcomes and describe a potential group of customers can reduce costs and service levels. This can lead to better management of debt and return on capital for commercial loans.

In summary, efficient data collection and analysis, automated credit scoring to improve underwriting decisions and competitive rates can deliver great benefits to lenders interested in improved profitability of commercial loans.

To talk more about this, or anything else, let The Hurdle Group assist you.