For a long time, expensive underwriting kept banks away from small business lending. But not anymore. The most recent example of a bank taking note of this area is KeyBank’s acquisition of Bolstr’s SMB-focused digital lending platform, which it announced this week.
Terms of the acquisition were not disclosed.
Founded in 2010, Bolstr is a digital lending and SaaS platform. It will enable KeyBank’s small business clients to streamline the process of applying for credit. And in turn, the platform will enable KeyBank to digitally accept and process loan applications significantly faster and at a lower cost. Bolstr’s software is currently being integrated and the product will be up and running sometime this year.
The acquisition of Bolstr will help KeyBank fulfill plans to originate $2.5 billion in loans to SMB clients over the next five years. KeyBank mentioned this goal when it first unveiled its $16.5 billion National Community Benefits Plan last year.
The benefits for a bank to work with a digital lending platform are plenty. The two most important advantages are cost savings and quicker underwriting. The digital platform speeds up the process by allowing automation, reduces paperwork and frees up the bank’s underwriters for more complex loans, and thus significantly cuts the costs associated with executing these loans. A typical SMB loan is $200K or smaller, but since it’s still a commercial loan underwriting costs, risks and compliance costs are high, digitalizing the process helps cut a lot of these costs.
Jamie Warder, Head of KeyBank Business Banking, said in a statement released Wednesday:
Bolstr’s technology transforms the small business lending process and allows us to more efficiently serve small businesses for their SBA and traditional lending needs.
Over the past two years, banks have increasingly gotten involved in SMB lending, realizing that these loans need to be viewed as a part of their small business offerings rather than a separate product (more on this here). While some banks are choosing to partner with platforms like Mirador or BlueVine, other banks like KeyBank prefer acquiring them.
The Bolstr team will join will join KeyBank, according to the announcement.
Based in Cleveland, KeyBank has $137.0 billion in assets as of March 31, 2018. It provides deposit, lending, cash management and investment services to retail consumers and businesses in 15 states. It has about 1,200 branches and more than 1,500 ATMs.Like This Post