The disruption caused by the alternative lenders in the loan market has pushed aggressive banks to review their conventional underwriting methods. While the banks have realised that their lengthy and stringent loan process is doing more harm than good, few other banks have jumped over to five-minute loans.
Automation enabled speed
Eastern Bank is the recent bank, which is interested in lending to small businesses within a fraction of minutes. The bank can approve loans up to $100,000 in as little as five minutes, which seems surprisingly fast given the bank’s history of processing loans in three to four weeks.
The credit for such speedy loan approval process goes to the bank’s hefty investment in automation, which has made the things way simpler than before. The new automated system paves the way for the bank to extend small-sized loans or help with financing needs of existing customers due to readily available information.
More banks join the race
Eastern Bank is not the only bank to chase speed in processing the loan application. J.P. Morgan Chase is another large player that has joined forces with On Deck Capital Inc., an online lender, to expedite the loan approval within minutes and release funding within 24 hours. At the same time, Bank of America Corp has also joined the race through the extension of the new line of credit, which will help reduce its loan processing time from three weeks to one week.
This is one way of reaching out to small business owners, who are already familiar with the bank or do regular transactions with the Bank, said the Bank of America official in a statement. This accentuates the significance of having a healthy relationship with banks for small business owners.
The move by both big and smaller banks reflects the sense of urgency for them to come out with solutions that could prevent further penetration of alternative lenders into the lending space. The news is more favourable for the small enterprises as the competition between online and offline lenders will only improve loan approval ratio for them.