Lending as a Service: Is it right for your bank?

Lending as a Service (LaaS) is the newest frontier in fintech—and it’s improving the lending process for businesses and financial institutions alike. LaaS, which falls under the umbrella of banking as a service (BaaS), gives financial institutions the technology, risk, and operational support to offer business loans through cloud-based third-party platforms, instead of using standard banking channels. 

At Funding Circle, we use our end-to-end lending solution to help banks, credit unions, and CDFIs process more business loans in less time—and enhance the customer experience along the way. 

How does LaaS work? 

Every LaaS provider operates slightly differently, but here’s a simplified look at the general process: 

• You partner with a LaaS provider to offer a digital lending platform to your small business customers. 
• Your small business customers apply for and receive business loans through that platform. 
• Your LaaS provider takes on the work of reviewing applications, originating loans, managing risk, and ensuring compliance. 
• You fund the loans, growing your loan book and earning interest without any upfront costs.
• You have more time to offer customers the personalized service and support they’ve come to expect from you. 
• You deliver a best-in-class small business loan product while keeping operations costs low. 

Why should you consider LaaS? 

LaaS solutions are designed to help financial institutions serve small businesses with more ease and efficiency. There are a few key reasons to consider adopting LaaS technology: 

1. To exceed customer expectations 

Small business owners’ expectations for financial institutions have changed dramatically since the start of the pandemic. Business owners have been forced to embrace digital services over the past two plus years—and they have no intention of stopping. A whopping 84% of banking customers plan to keep the same level of digital banking indefinitely, according to PYMNTS.com’s March/April 2022 Digital-First Banking Tracker. 

With digitization as the new norm, businesses expect convenience, transparency, and speed from their banking institutions. Over half (66%) of small business owners surveyed in an Ernst and Young 2021 report said it was extremely important to get faster access to credit when needed; of those respondents, 58% would like credit within seven days, while 33% would like it even quicker—within three days. The report also found that 68% of small business owners would like to manage as many aspects of their business through digital touchpoints as possible. 

To retain and delight customers, financial institutions need to meet business owners where they are. That doesn’t just mean increasing access to digital banking and lending services—it also means streamlining those services. Over half (53%) of small business owners surveyed in the EY report said it’s important for their financial provider to offer an easy-to-use digital experience. 

That’s where LaaS comes in. By simplifying the loan application process and moving it online, you can save business owners time and stress. LaaS solutions also come with advanced underwriting technology to expedite the approval process, so your customers get answers—and funds—within days instead of weeks or months. 

2. To improve efficiency and cut costs

Not only does LaaS improve the lending experience for your customers—it also makes lending easier on the backend. Many financial institutions don’t have the systems or technology necessary to cost-effectively process a high volume of small business loan applications, let alone distribute funds in a reasonable timeframe. 

Manually reviewing and processing piles of paper documents for each loan applicant is tedious and expensive. The time and resources you put toward reviewing applications can be costly compared to the amount you actually approve. 

With a LaaS solution, you can serve a greater number of small businesses with less hassle. API integration means more efficient document collection, fraud detection, and advanced underwriting technology means faster approval decisions and predictable returns. The result: you can save time, grow your loan book, and cut costs. 

3. To stay adaptable 

The financial landscape is continuously evolving—and financial institutions need the right tools and support to stay nimble. LaaS technology lets you meet changing market demands without increasing overhead expenses. By partnering with a LaaS provider, you can build a full-service lending program at a lower cost, then scale it to fit your needs.  

What should you look for in a LaaS provider? 

When you’re researching LaaS providers, consider the following four factors before making a decision: 

1. Advanced software: Quality LaaS software should improve the lending process from end to end—for both business owners and banking professionals. Look for software that lets you do everything from application intake to underwriting in the most efficient, painless way possible. 
2. Experienced risk models: A good LaaS provider should have risk models tested over many years with thousands of customers to guide your creditworthiness standards and loan approvals. 
3. Smooth, robust operations: In addition to smart technology, you want to be sure you’re getting access to a robust operational team who can handle marketing, sales, customer service, compliance, and closing. 
4. Expertise in small business lending: LaaS providers should be knowledgeable about the small business lending market, so they can advise you on what steps to take.  

Partnering with Funding Circle for LaaS

At Funding Circle, we’re transforming the lending experience for banks and borrowers.  Here are just a few reasons to consider working with us:

1. We offer an end-to-end lending program

Our LaaS solution is full-service lending. Our end-to-end platform offers:

• One streamlined online application 
• One-on-one dedicated Account Managers for each applicant
• Easy document collection process
• Credit underwriting with 10+ years of track record
• Compliance and fraud detection
• Origination and disbursement
• Servicing through to loan payoff

With over 10 years of experience, we’re a well-oiled credit processing machine. Our approach combines quantitative models with qualitative review for more thorough risk assessment and fast, accurate underwriting. Plus, our robust, experienced operations team handles everything from marketing support to compliance, offering you analytics and insights along the way. 

We do the loan legwork, so you can spend more time interfacing with customers—and acquiring new ones. 

2. We provide first-class customer service and speed

At Funding Circle, we strive to offer the best of both worlds. We pride ourselves on personalized customer service with all the ease and efficiency of the online flow. 

That’s why our goal is to make the lending experience seamless for all parties involved—especially customers. We’ll work with you to create a customizable lending platform that supports your goals and better accommodates the business owners you want to serve.  

Through the platform, business owners can apply for a loan online in just six minutes, typically hear back within one business day of uploading documents, and get funds in as little as 48 hours. We also assign every applicant a dedicated Account Manager to walk them through documentation submission and answer questions. 

3. We’re small business experts

Funding Circle has been funding and supporting small businesses globally since 2010. Small businesses are the engine of the economy, which is why it’s our mission to help them get the funds they need to succeed. Throughout our 12 years working with small business owners, we’ve learned a lot about the global small business market, as well as what individual business owners need to thrive. 

Our technology and lending process is designed with small business owners’ unique pain points and dreams in mind. That’s why we offer flexible, fast loans to help businesses at every stage succeed, whether they want to start a new operation, achieve stability, or plan for long-term growth. 

As the leading global provider for small business loans, we’ve helped more than 122,000 small businesses access more than $18.4 billion in financing. We’ve fine-tuned our technology and process, so we’re able to offer affordable interest rates and fast turnarounds—while providing the quality service of a bank. 

Using LaaS to get ahead

Whether you’re struggling to service the small businesses that bank with you or want to increase your competitive edge, LaaS solutions can help. Banks like Pitney Bowes already use Funding Circle’s LaaS service to offer small business loans to their customers. 

LaaS lets you originate more loans at lower costs, while giving your customers even more options and attention. It’s a win-win. 

If you’re interested in partnering with Funding Circle to build a better lending program, reach out for more information. We’re excited to talk with you.

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