Behind the Scenes: Technology Makes it Possible

Most often, the small business owners that come to IOU Financial for a loan have already been painfully exposed to the fact that banks are much less likely to lend to them. These owners come seeking alternative lending options out of necessity, but also end up finding out that the process of working with IOU Financial is so much easier and faster. What they don’t know is that behind the scenes, it is our technology platform and APIs (application programming interfaces) that make our paperless application and approval process possible.

While traditional banks typically touch an application several times as the loan moves from data entry to processing and eventually to underwriting, we use technology that streamlines the entire process, relying on data we gather automatically through the third-party APIs instead of manual steps. For the borrower, this means less paperwork, fewer pieces of documentation to physically provide, and a quicker, more efficient loan application process. Today, we have developed connections to nearly a dozen APIs including Equifax and the Office of Foreign Assets Control (OFAC), as well as eBay and several social media sites. The latter allows us to also consider non-traditional loan criteria, such as Yelp! ratings, in the decision making process.

IOU Financial is raising the bar for technology in the lending space, which is why we can process and approve loans in a matter of days, compared to the weeks or months that are most often the case for traditional lenders. And, as we continue to add more API connections, we will be able to automatically gather data from even more data sources. Our expectation is that in the future, these and other technology advances will allow us to go from application to funding in just minutes or hours.

Bridging the Gap Between Banks and Online Lenders

I recently participated on a panel with several bankers during the PayNet event in Chicago, so this article in American Banker about banks needing a strategy around small business lending was especially interesting to me. Its author, Andy Peters, brings up a good point that has also been discussed around our office for years: Where is the bridge in the gap between banks and small business lenders like IOU Financial?

Bankers, of course, feel as though they are lending to many or most of the qualified candidates that come through their doors. But the reality is that many of those candidates don’t even make it halfway. Take the example of a small retail boutique owner who needs a loan but has little to offer in assets to secure it. Say this owner goes to her local bank and applies for a $20,000 loan. The odds are that she won’t get a loan approval, but will instead walk away with a credit card application.

From a bank’s perspective, loans of this size simply are not profitable. The cost and manpower required to process them don’t really move the needle for the bank. In contrast, however, IOU Financial can process thousands of applications a month by leveraging our technology over traditional manpower, which is exactly why we can extend services to small business owners needing capital to grow and succeed.

As it relates to small business owners seeking loans, community banks in particular should be thinking, “what happens to our relationship with this candidate if we don’t approve the loan?” and “where will the small business deposit the money it borrows?” For banks that want to retain these local clients (and reap the related benefits), there is obviously a lot at stake here.

The key is figuring out how traditional banks and small business lenders can best coexist to create the most optimal long term solution for the small business owner, while still meeting their own unique objectives. As the article suggests, finding this solution can open up new opportunities for virtually everyone involved.