By: Michael D. Ryan, President/CEO

3D illustration of shiny transparent ballsMany community banks have seen their deal pipelines dwindle during the latter part of 2023 primarily as a result of the effects of swiftly rising interest rates and uncertain economic conditions. Today, new commercial financing opportunities are far less abundant, and many community banks have tightened credit standards and limited credit availability.  There was a time not long ago when a lender would need to do little more than answer the phone or respond to an email to find a business owner in need of financing. Conditions have clearly changed, making planning ever more important. Banks must focus on building and maintaining a pipeline of new financing opportunities while maximizing its database of prospective business customers.

Most commercial lenders rely on networking sources and centers of influence for new business referrals with no complementary strategy for generating new customer relationships when market demand softens, or the referral flow dampens.

One alternative to finding new business outside of networking and utilizing referrals is the implementation of a Lead Generation Program designed to target business owners within a lender’s targeted geographical markets that meet specific criteria based on well-defined metrics such as revenue size, SIC or NAICS codes and industry focus (such as manufacturers, distributors, service companies, professional services and specialty industries – including hotels/motels, self-storage, healthcare). This targeted approach to new business development enables banks to reach hundreds or even thousands of quality prospects and build a valuable prospect database over time. By outsourcing to a qualified lead generation company (service provider), banks can cost-effectively reach new prospects when a full calling campaign is conducted with the goal of setting new in-person appointments with borrower decision makers.

When using these service providers, all of the prospect’s data is captured, managed and maintained by the service provider, and the program information and metrics gathered are property of the bank – available on demand. Program costs vary depending on the size of the universe of prospects and the term of the Lead Generation Program. A typical 200-hour pilot program will require approximately 90 days to complete and can be expected to generate up to 36 to 40 new in-person appointments at a cost ranging from $15,000 to $20,000. Ideally, this cost will be offset through the success of the program. By sourcing a single $500,000, 5-year mortgage loan amortizing over a 20-year schedule and priced at 8.00% fixed with a 1% facility fee, the bank will generate year one interest income of approximately $40,000 plus $5,000.00 in fee income. This single transaction will more than offset the cost of the Lead Generation Program.

With this in mind, the question is: Can your community bank afford NOT to invest in a Lead Generation Program?

Contact us to learn more about our lead-generation program – a cost-effective way to develop in-person appointments with qualified business borrowers for your financial institution.