Both governmental regulatory changes and an innovation-driven market have paved the way for the boom of ‘Alternative lending’, which is increasingly taking over traditional marketplaces. One key factor that is revving up the demand for this platform is its distinctive approach to underwriting, which is analytical and dependent on important aspects of customer data.

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Big Banks Rely On Conventional Models

The traditional banks are still using old-fashioned underwriting models that often lead to wrong decision regarding who to loan money to and at what rate. Moreover, old models take a lot of time time to ascertain the creditworthiness of a borrower, which in turn, only escalates the waiting time period for small business owners.

Ascend Consumer Financial’s Scott Crawford, VP of product and marketing, said that conventional underwriting comes with major problems, which need to be addressed through alternative data sources. Small business loan provider OnDeck’s Krishna Venkatraman, SVP of Data and Analytics, strongly feels that disruption in the existing business model from alternative lenders can only lead to innovation.

Speedy And Dependable

Using the latest analytical solutions, alternative lenders can create holistic profiles of their potential borrowers, which leads to speedy processing of the applications without clouding judgement.

Crawford is confident that alternative lending solutions will soon claim a larger share of the lending industry, given its aggressive approach to testing new credit models and the ability to launch them in the market. Crawford added that the fast pace of testing new credit scoring methods could bring about insightful feedback and help the industry to streamline the whole industry of credit modelling.

By looking at the current business models of big banks, which remain focused on conventional ways of credit profiling, Crawford projects that those banks will fall behind in the loan industry. He sees rapid growth for firms that have proven and modern underwriting and business models.

These facts should encourage small business owners and startups to approach alternative lenders rather than getting turned down by traditional banks, big or small. Not only are the chances higher for getting the required loan, but the use of the latest in analytics reduces the rejection rate.