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Dialing into diversification – how community banks can keep lending local

The following is a guest post by Joe Ehrhardt, CEO & Founder Teslar Software.

A lot is going on with the economy, leaving the banking industry at a crossroads regarding where they should focus and invest.

It is becoming increasingly necessary for financial institutions to start thinking outside the box for ways to grow and diversify their loan portfolios.

While there is already a crowded market for small-dollar loans (like Klarna and Affirm) and large commercial loans, there are not many options for consumers regarding responsible, local lending for purchases that fall in between.

If a consumer needs goods or services that fall in this medium-sized purchase category – purchases like HVAC replacements, engagement rings or fine jewelry, power sports, death care services, or farm equipment, to name a few — they would typically need to or prefer to finance.

However, the financing options, if any, are usually only available from large institutions like Wells Fargo or Synchrony.

Looking to expand offerings

Most community institutions would like to expand offerings to the people their small business customers serve. However, the cost and resources needed to offer indirect lending have historically dissuaded them from competing in the space.

Many community institutions also avoid indirect lending due to its association with the automotive industry, but indirect lending can be much broader than that. Community institutions can make indirect lending lucrative and valuable with modern technology and the right strategy.

For community institutions to execute indirect lending cost-effectively, they must leverage technology to digitize and automate the process.


Potential borrowers should be able to apply from their mobile devices with minimal documentation, making the process convenient and easy.

For example, if a customer has their HVAC repaired and is told it needs to be replaced, they could use their phone to quickly lock in a loan with the local bank right then and there.

The process must be highly efficient on the bank side to be profitable, which is where further strategic use of modern technology comes in.

After borrower information is input, bankers must be able to render quick decisions based on their unique underwriting criteria, leaving only exceptions to be manually reviewed by loan officers.

Automated workflows can enable loan officers to handle multiple loans simultaneously, boosting volume and efficiency to make indirect lending easier, quicker, and more profitable.

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Solid opportunity

Indirect lending presents a solid opportunity to contribute to the bottom line while strengthening relationships with businesses and consumers.

Partnering with local businesses to offer financing options can be a win for all involved. Customers gain convenient, easy financing options with a competitive rate from a trusted, local institution; businesses can increase sales; and banks drive more loans and customers back to the institution.

This improved approach to indirect lending keeps lending local without the inconvenience and inefficiencies associated with manual, paper-based processes.

By offering financing options to customers through local business partnerships, financial institutions can grow their loan portfolios and enhance their digital lending strategy while broadening their community impact and improving their bottom lines.

  • Joe Ehrhardt

    Joe is the CEO and founder of Teslar Software, provider of portfolio management tools that aggregate and automate lending and deposit operations for community financial institutions. In his role as CEO, Ehrhardt shapes the company’s strategic vision, oversees the team, and ensures employees have access to the resources they need to enable Teslar’s community financial institution clients to streamline processes and improve operations with better data.