California bank outperforms its online competitors

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Commercial lenders in the marketplace often point out that the lives of busy small business owners often do not correspond to “bankers’ schedules.” Be able to apply for credit from online players like Kabbage or On the bridge any time of day is a much touted benefit. He plays credit to the hungry who find their credit by Googling for it.

First Foundation Bank, an 11-year-old, $ 4.5 billion asset bank headquartered in Irvine, Calif., understands that message. Lorrie Asker, senior vice president, commercial banking, says she’s heard many customers say they run their finances and banking between 10 p.m. and 2 a.m. In the Amazon age, everyone says – it aspires to the immediate availability of online services, including banking.

However, adds Asker, not all commercial banking questions, nor all needs, can be addressed through a website. That is why, as the First Foundation ventured into online commercial credit for small businesses, it offered a platform that can be used directly by the user as well as in branches or offices of clients. where agency managers or a loan officer can offer advice and answer questions. because applicants are looking for credit. (Some market platforms offer live advisors. See “Evolution of Fintech Commercial Lenders”)

In addition to a human contact option, First Foundation offers something that is not always available from credit players in the market: a bank interest rate.

“Our prices are more advantageous because we seek to develop a complete customer relationship with these customers,” explains Asker. Lender rates in the small business market tend to be higher, and some banks are attracting new customers by refinancing loans online at higher rates.

Respond to the competition

First Foundation has faced a double challenge as it strives to increase its lending to small businesses. Facing online competition – Asker says Kabbage and OnDeck are significant rivals – the bank is a newcomer among banks and has had to learn to be nimble to compete with established commercial banks.

The company offers both commercial banking and investment management services. In fact, the investment business preceded banking. It started in 1990, followed by banking in 2007. At the start of the bank’s young life, it mainly focused on private banking, linking credit with investment management.

As the bank continued to develop its business offerings, it turned to Asker and others to bring their C&I and small business banking experience to the banking markets. First Foundation is strong in Southern California, but also does business in the northern part of the state as well as Las Vegas, Nevada, and Honolulu, Hawaii.

Working with Terri Hipwell, Senior Vice President, Business Underwriting and Processing, Asker came on board several years ago to set up the bank for business banking services for large clients and small borrowers. (The two had previously worked together in similar roles at Umpqua Bank.)

Online, but not everywhere

In April 2017, the bank implemented its Small Business Lending Program, incorporating an online banking platform hosted by Viewpoint, a FinTech provider, which customers can reach on their own through the bank’s website.

First Foundation viewed online services as a complement to its community lending efforts. Users entering non-market postal codes, for example, are quickly filtered by the platform, which offers other ways to reach the bank if the potential borrower has further questions. At this point, the bank is not looking to develop a lending model everywhere, seeing online as another channel to serve its markets. The goal for online loans is between $ 10,000 and $ 250,000.

In this context, says Hipwell, the bank felt it was important to involve branch managers. At First Foundation, they play an active role in developing the penetration of the banking business market, by placing calls. One of the reasons for the acquisitions the bank has made or is in the process of making has been to increase its physical presence in the markets it wishes to serve with commercial loans and business services.

The online loan platform allows users to complete applications including the ability to upload key documents or link documents from compatible electronic platforms in order to complete the loan file through the secure portal. Live bankers are available at branches during bank hours to answer questions or to assist applicants who need assistance with documents or to complete the online application. But not at 2 am!

Asker says the bank can usually provide firm responses to requests within two to three business days. (Approvals from market lenders are sometimes conditional, leading to complaints among some applicants who thought they had obtained a loan only to find that the “approval” was preliminary.)

“Our customers are met where they want to be met,” says Asker. The bank sees its approach as a combination of “high tech, high touch”. Creating an easy-to-make personal connection can also help the bank extend its credit relationship into a stronger one, she adds.

Build volume

Asker says the bank has been working to establish its social media presence, which will help reach business owners who are turning to the web to find lenders. As a new player, she says, name recognition is a growth factor. The bank has experienced steady growth in loans over the past few years.

In 2017, the online platform represented 34 loans totaling $ 3.6 million. In 2018, so far, the platform has produced 31 loans for a total of $ 3.5 million.

Given this trend, Asker says it’s likely the bank will more than double the volume brought in through the platform in 2018. Beyond credit generation, she says, those openings have been stepped up.

“These are real banking relationships,” says Asker.

Currently, the platform’s applications are based on traditional credit standards, which first involve an electronic scorecard. This has already speeded up the process for these small trade credits. As the bank gains experience, Asker says, alternative credit standards, perhaps more similar to those used by Kabbage and others, will be explored.


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About Ricardo Schulte

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