Every bank is looking for an edge in the competitive lending industry. Some banks leverage their advantages, using their extensive capital holdings and a long, international reach to undercut rates in specific lending markets (at least temporarily). Other banks have to compete without these advantages. One way to remain competitive is to diversify your lending opportunities in ways other banks may not be willing or able to try.

Chris Nichols of CenterState Bank says, “We estimate that roughly 15% of banks under $1B in assets currently use a loan pricing model (in-house or purchased). For banks under $250mm in assets, that percentage is substantially smaller.” This is unfortunate, because a loan pricing model is one advantage any bank can utilize. By using a pricing model effectively, you can know what rates you can afford. Then, by comparing those rates to current market rates, you can identify which loan markets you would be most competitive in.

The Hurdle Group provides a commercial loan pricing model that can help you determine the responsible rates you could charge in any commercial loan marketplace. For example, if you want to see whether you would be competitive in the startups market, you could use a commercial loan pricing model to determine the responsible rates you could charge and then compare those rates with the current market rates in this lending segment. With so many unmet financial needs in the startup marketplace, you may discover that you can offer competitive, profitable rates in this marketplace that could substantially boost your overall success.

You may also use the commercial loan pricing model to assess your competitiveness in lending to middle market America. For example, according to Jonathan Shapiro of Financial Review, “Churchill Asset Management, the reincarnated debt fund backed by US insurance giant TIAA-CREF, is looking to deploy more debt capital to America’s small to medium-sized businesses with enterprise values ranging from between $US50 million ($70 million) and $US500 million.” Your commercial loan pricing model may reveal that you could compete successfully in this lending market, further boosting your success by tapping into another market in need of increased funding. Contact us for a free trial or personalized demo to discover which new markets you can tap into in order to bolster the competitiveness of your bank.

Alan Lee
www.HurdleGroup.com
www.TheSchoolOfBanking.com
1-847-380-2460