Microlending Academy Peer Discussion

1. Microlending AcademyPeer Discussion Efficiencies in Lending or Finding Existing Barriers to Loan Growth

2. Today’s Agenda • Review key points from OFN webinar • Review some of their suggestions • Discuss • Give feedback on role or services CAMEO could provide

3. Today’s Questions • In a time of unprecedented change in small business lending, • Where easy, fast funding is available 24/7 How efficient is your process? Have you “mapped” your loan process? Where are there bottlenecks? How can you reduce bottlenecks?

4. When Efficiency is Important • Desire to grow volume and impact tends to make CDFIs interested in efficiency • If historic volume is enough, then current process tends to be seen as good enough • Change is hard & can cause disruption

5. Lending Life Cycle From First Contact to Final Payment Mission + Business Model Customer acquisition Loan Decision Loan Servicing Loan Closing Underwriting Trouble Loan Management

6. A Bottleneck Compared to What? Only a bottleneck compared to something else • Compared to your own standard of good service • Compared to an external industry standards: Other CDFI’s, Banks or FinTech • Cultural norms and standards change as technology changes • Long-standing processes tend to get normalized and become invisible

7. Business Model Obsolete • Many businesses decline because the assumptions that inform their fundamental business decisions -- about society, markets, customers, products, technology, mission -- become obsolete. Peter Drucker

8. Business Model Invisibility • Why is it so difficult for companies to pull off the new growth that innovation can bring? • They don’t see their current business model well enough to know if it would suit a new opportunity or hinder it, and they don’t know how to build a new model when they need it. Harvard Business Review

9. Process Map Customer Acquisition 1. Outreach activities 2. Client meeting Application 1. Client meeting 2. Assessment of app Document Collection 1. Doc list to client 2. Two follow-up calls Underwriting 1. Create spreadsheet 2. Calls to client Closing 1. Create closing docs 2. Insur / UC filing docs

10. Process Mapping from MMS Auto Review Doc Collection Underwriting Closing

11. Balance These Exigencies Transactional speeds up Relational slows down

12. One Way to Address Bottlenecks • What are our particular steps? • Are we happy with the # of days at each step? • Does it seem efficient to us? What about compared to others’ processes in our industry? • What type of employee is suited to each step? Some steps take a ‘deal maker’ personality. Some are ‘administrative.’

13. Measuring Efficiency • Number of days on each step • Cost per loan • Conversion rates • Repayment rates • Default rates • Number of loans per employee

14. Examples from CDFI Presenters • Assessed performance of each staff person in terms of volume and repayment • Made performance by lender public information in monthly tracking format • Tracked & distributed number of days for each step over time

15. More Examples • Created lending dashboard, updated daily, posted organization-wide: lending volume, deployment rate, size of pipeline, jobs created – all compared to goals • Team integration • Loan officers no longer close deals; dedicated closing staff • Align funder reporting and covenant requirements on borrowed funds

16. OFN Webinar Series Topic Date Small Business LandscapeFebruary 11 Business Model Canvas March 3 Value Proposition March 24 Customer Acquisition April 14 Lending Life Cycle–Efficiencies May 5 Lending Life Cycle –Technology May 26 Talent Management June 16

17. Thanks!!