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Faster Construction Loan Process = More Profit & Happier Borrowers

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How many spreadsheets does it take to process a new construction loan? Far too many. The old adage “if it ain’t broke, don’t fix it” comes to mind, but sometimes we don’t know something is broken until it’s fixed. As with everything in the modern world, processes are digitizing, especially for banks in a competitive market. Banks across the country are beginning to feel the strain of the inefficient “old way” of processing and maintaining loans and many are beginning to realize that a boost in efficiency would benefit the bank in multiple ways.

Borrower Experience

Keeping and maintaining great borrowers is one of the best ways to ensure your survival and profitability. As more and more financial institutions are getting acquired or changing hands, offering an exceptional borrower experience is becoming a top priority. What do borrowers want? Less hassle and what they want when they want from any device they prefer. Mobility and automation cut down on borrower effort and leave them with a pleasant experience rather than a headache. To ensure borrowers return to your bank it is key to focus on their experience.

Risk Management

The more real-time information your bank can have, the more protection you can provide to the bank and our shareholders. Having a digital system at your fingertips with text alerts and detailed audit trails can keep your staff better informed and protected than the manual, spreadsheet-based process. Real-time reporting and overfunding alerts help institutions identify and mitigate risk quickly before it becomes a problem.

Increase Draw Interest

Who couldn’t benefit from a decrease in cycle time? An increase in draw interest? If you could decrease cycle time and increase draw interest while increasing staff capacity, wouldn’t you? Banks are turning to technology to accomplish all of these goals. The more efficient your staff is, the more loans they can manage safely and comfortably, and that gain is passed on to the bank’s bottom line. Each day we save in the process is a big boost to draw interest. In these rate environments that are more important than ever.

Conclusion

The great digital change has finally made its way to banks of every size. It is no longer a “big bank” privilege. It is the responsibility of every bank. Even banks that are not intent on hyper-growth are realizing that to stay competitive and retain quality borrowers, they need to adapt and adopt new technologies. The good news is that technology solutions are getting easier and easier to implement. Gone are the days of the months-long implementation process. Today’s systems are mobile and cloud-based, meaning they can be accessed from anywhere, with no downloads and installations necessary. As technology advances these efficient systems will become a part of our everyday lives, in more corners and more sectors than ever. Consolidation and the threat from disruptive fintech lenders are here to stay.  We owe it to our shareholders to build modern, borrower-friendly efficient processes.

 

  • Matt Johnner, president of BankLabs and board member of Encore Bank.

 

Arkansas Business Article about BankLabs

Arkansas Business: ‘Friendly’ Fintech BankLabs Helps With Lending

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‘Friendly’ Fintech BankLabs Helps With Lending

by Sarah Campbell-Miller on July 26th 2021

 

BankLabs of Little Rock will graduate from this year’s FIS Fintech Accelerator in August as it adds employees and works on a new software product designed to automate agricultural lending for banks.

BankLabs was the only Arkansas company selected from 148 applicants across 31 countries to participate in the program, which is sponsored by financial technology giant FIS of Jacksonville, Florida, and the state of Arkansas and hosted by the Venture Center of Little Rock.

“We like to call ourselves friendly fintech. The reason we use that term is we’re helping banks around the country, regardless of size, defend against the disruptive fintechs,” Matt Johnner, BankLabs president and co-founder, told Arkansas Business. “We’re the friendly fintech that helps the banks deploy additional lending solutions, including some more forward-thinking things, like allowing different companies to make loans to each other, but still benefiting the bank.”

The company was founded in 2016 and employs about 30 people. It’s hiring another 16 over the next year, he said. “We are really at a point of acceleration, or a tipping point. We’ve signed over 130 banks in the first five years. We’ve now built a great foundation,” Johnner said. “And so now it’s time to go to the next level. We’d like to double our revenue in this coming year. And then double the year after that; we just closed our first outside funding round with some great individual investors.”

He declined to disclose the company’s annual revenue, but said it raised more than the $3 million it sought from the funding round. BankLabs isn’t profitable yet. It “could be profitable in less than one year, but that would sacrifice growth,” Johnner said. He added that he was not building the company to sell it.

Johnner said BankLabs aims to be a company that has a multi-product portfolio heavily focused on commercial lending and is profitable in the long run. “We will continue to evaluate opportunities. We have had some folks try to acquire us already, and we just determined it wasn’t the right time,” he said.

For now, BankLabs has two main products, Construct and Participate. The company’s new agricultural lending product is unnamed and in the “ideation phase,” Johnner said.

Construct is software that automates construction lending for lenders to make that process — traditionally accomplished with spreadsheets and other paper documents — more profitable and efficient. The automation also reduces risk by providing real-time alerts to lenders.

Participate is software that automates lending between lenders. For example, a small bank that has a loan limit of $6 million could use it to lend $15 million to a borrower, with the additional $9 million participation coming from a partner bank, Johnner said. The software “automates the whole digital lending flow and has a marketplace component to it, to find new partners if that bank doesn’t have enough partners already,” he said.

BankLabs’s goals include signing more banks up for its products and building out the network effect of Participate. “So, if you’re a bank in Arkansas and you have, let’s say, 10 or 15 loan participations on your balance sheet, you might also have 10 unique banks that have bought one or more of those from you,” Johnner said. “And so what we do is we try to leverage that network effect, … give free access to [the] 10 downstream banks. And then we lovingly land and expand and try to upsell them.”

In addition, BankLabs touts experience in banking and technology from both Johnner and its co-founder, Chairman and CEO Mike Montgomery.

Johnner was an oilfield engineer before he joined Perot Systems Corp., which is now Dell Information Services, in 1994. After that, he worked for numerous technology companies.

Johnner said Montgomery is a third-generation banker who has invested in more than 20 community banks around the country and serves on the board of Southern Bancorp in Arkadelphia. Montgomery was also an executive at Systematics Inc., the Arkansas-based predecessor of FIS. Johnner called his partner’s past experience “fintech 1.0.”

“We’re trying to help Arkansas expand its economy and bring high-paying jobs back to Arkansas, through what we would call fintech 2.0,” he said. “This is a great time of consolidation for banks. It’s a great threat to banks that don’t innovate. So we seek out and welcome banks that are looking for digital innovation and defense against the bad guys.”

 

 

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Arkansas Money and Politics features BankLabs

Arkansas Money and Politics: BankLabs Aiming to Further Disrupt Commercial Lending Space

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“Matt Johnner, BankLabs Aiming to Further Disrupt Commercial Lending Space”

in Arkansas Money and Politics,

Matt Johnner is no stranger to taking on challenges. He worked as a drilling fluid engineer in the oil and gas industry in such far-flung locales as Nigeria, Yemen and Dubai before entering the business world as a top-level software developer for the famous Texas billionaire H. Ross Perot at Perot Systems.

From there, the 50-year-old New York native gained a vast amount of experience by leapfrogging across several startup and small-stage companies, eventually working for Texas tech giant Morton Myerson. So, when he got the call from Mike Montgomery to join the financing company Radius Group in 2013, he jumped at the chance to start a journey that led to the founding of BankLabs in 2016, where he serves as president to this day.

BankLabs is a multi-product company that helps banks compete with “disruptive fintechs” and large international banks by automating lending. Their products help banks work on loans together when they’re too large for just one bank to handle, thus minimizing the concentration risk while replacing the inefficient, traditional process for handling loans.

The impressive results include being picked as one of just 10 companies from across the United States and 29 other countries to be part of the 2021 FIS Fintech Accelerator at The Venture Center in Little Rock. Johnner hopes participation in the accelerator will help his team grow Banklab’s Participate program.

“We started with a product called Construct, which automated construction lending, and now Participate is a balance-sheet management tool for banks used to sell off pieces of loans they already have and sell them at a premium to increase loan profit and reduce concentration risk,” he explained. “We think this can also create a whole new digital-lending channel and allow merchants to make loans to other merchants.”

Johnner posits an example in which a lumber yard has a small-to-medium size business client that buys $500,000 worth of lumber each year.

“That client needs lower financing costs than a credit card’s 21 percent. We see a day where Participate facilitates a loan between the lumber yard and a carpentry business at a much lower rate, say 5 percent,” said Johnner. “And we execute on our mission to help banks and be a friendly fintech and allow the banks in our universe or our partner’s universe like FIS to put the loans on bank balance sheets in our network.

“We see a day where the lumber yards, mills and manufacturers are getting loans from their suppliers and the suppliers are keeping loyal customers, maybe making a little bit of money on the loan, and then the loan goes on the bank’s balance sheet. It’s a version of buy now, pay later. We’ll see. Most people think we’re a little crazy, but we always think that’s a good thing.”

Participate follows the success of BankLabs’ Construct program, which aimed to create big changes in the annual $1.3 trillion construction loans marketplace. Construct’s +Pay feature automated the construction payment stream for builders, general contractors, banks, title companies or disbursement agents that pay subcontractors.

Builders and banks benefit from the resulting faster process that eliminated paper with electronic lien waivers and invoices, while builders got automated 1099 reporting and project accounting. Subcontractors receive same-day pay through its ACH feature, and all told, this makes +Pay and Construct the world’s first cloud-based, vertically integrated construction-funding platform.

Those innovative approaches have paid off with more than 100 bank clients such as CenterState, a $45 billion Florida-based bank; the $15 billion Plains Capital Bank based in Dallas; as well as smaller banks including the $500 million Valliance Bank in Oklahoma and north Texas. BankLabs’ work with CenterState increased its construction loan portfolio by 567 percent. Altogether, it has managed $37 billion worth of construction loans across 57,000 projects.

While Johnner is based at the firm’s offices in Dallas, it proudly counts Little Rock as its headquarters, building on the tradition of other giants including Systematics and Alltel.  The company currently has 30 employees but is looking to add 16 more staffers in the next six to nine months in the fields of software engineers, sales and customer-satisfaction specialists.

“Our goal is to differentiate the financial institutions that are not happy with the status quo from those that are resistant to change,” Johnner said. “Our clients want new ways to do things that leverage their strengths. We’re at a huge transition point and have a huge runway ahead of us and that’s only possible through great team.”

 

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Establishing a Successful Partnership Between a Financial Institution and a Fintech

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Establishing a Successful Partnership Between a Financial Institution and a Fintech

By Matt Johnner, president and co-founder of BankLabs 

As featured in William Mills Agency’s 2018 Bankers as Buyers Report.

Our society associates financial institutions with stability and trust, while fintechs typically epitomize change and innovation. These two opposing forces may seem to have very little in common, but that does not mean they can’t successfully work together to achieve a common goal.

According to PricewaterhouseCooper’s (PwC) 2017 Global Fintech Report, over 80 percent of financial institutions believe business is at risk to innovators. That may be true if the innovator is attempting to stand alone or replace financial institutions altogether. However, by partnering with a financial institution, innovators can work with a bank or credit union to solve an issue or meet a need.

Additionally, PwC reports that 82 percent of financial institutions expect to increase partnerships with fintechs in the next three to five years. This shows that financial institutions are willing to explore the innovative world of financial technology in order to provide better service to their customers, or scale a product outside of their traditional market.

 

Benefits of Partnerships between Financial Institutions and Fintechs

By partnering with a fintech provider, financial institutions improve upon the things they are already doing well. Technology can be used to solve an issue, update an existing process or enhance customer interactions. Fintechs have a lot to offer financial institutions, such as advanced, forward-looking technology and a fresh, outside perspective.

Of course, the partnership is just as beneficial to the fintech provider. Fintechs may hope to disrupt the industry by creating an unparalleled user experience, but solely focusing on this is not enough to be successful. A fintech provider without a financial institution to serve often ends up biting off more than they can chew.

With the implementation of a fintech service, financial institutions can differentiate themselves from other lenders in the space. By automating services and providing consumers with an innovative and efficient tool to make their lives easier, the financial institution becomes more competitive while also broadening their market. And, customers receiving a positive user experience from their bank or credit union will likely choose to stay with that bank or credit union.

A successful fintech partnership can also provide an additional revenue stream for the financial institution. Some fintechs can offer financial institutions modern, user-centric services that fulfill consumers’ needs while simultaneously charging a small fee on transactions that goes straight back to the financial institution. Think about how many paper checks still exist in unique industries or processes.

 

Tips to Create a Successful Partnership

Let’s start with an unsuccessful partnership; this is one that is created with the purpose of looking for a problem rather than solving one. A successful partnership begins when a fintech and a financial institution see a solution to an existing problem and need each other’s help in bringing that solution to life.

A smart fintech understands that a financial institution’s brand is extremely important to its success and cannot be jeopardized. Fintechs must approach potential partnerships with a thoughtful, conservative mindset. A failed fintech reflects poorly on the financial institution and its brand.

An equally important factor in a successful partnership is the financial institution ensuring its fintech provider has a strong background in banking. While fintechs offer unique, outside perspectives, they should also understand the fundamentals and the complexities of banking. The best fintechs have established bankers as part of their team or board of directors who understand the banking industry and the sanctity of its brand, needs and technology.

In addition, fintechs should leverage the financial institution’s existing products if speed to market and velocity is important. The solution must seamlessly integrate into the existing landscape and utilize the financial institution’s pre-existing product or distribution to solve a problem.

Lastly, open communication between the financial institution and fintech provider is key. The two should take part in an open discussion at the beginning of the partnership to determine goals and expectations. As previously mentioned, each party has a very different way of thinking, so it is imperative to discuss the definition of success early in the relationship.

It is important to remember that fintechs and financial institutions should not be competing with each other; they should be supporting each other. The best partnership is one in which both the parties achieve a goal that helps improve processes, reduce costs and enhance the user experience.

Matt Johnner is president and co-founder of BankLabs, a national provider of innovative, mobile technology products that help community banks improve efficiency, increase time for relationships with customers and create marketplace options that expand business opportunities. BankLabs believes that community banking is a way of doing business, not a size. For more information, visit banklabsstaging.mystagingwebsite.com.

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American Banker: As construction lending rebounds, tech investment follows

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American-Banker-bank-labs-construction-lendingAs featured in American Banker.

As construction lending starts to make a comeback, many community banks relying on lending to developers and builders are looking to use cutting-edge digital interfaces to help them attract more clients.

“It’s important for us to create convenience not only for our clients but for their clients as well [such as subcontractors] and give them quicker and more convenient access to funds,” said David Veurink, chief credit officer and head of commercial banking at Chicago-based Countryside Bank.

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Construction Executive: Automate The Entire Construction Loan Process

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In today’s digital world, instant gratification is not only desired but expected. People expect to click a button and be able to pay bills online, schedule an appointment and receive texts to refill a prescription. Our patience has declined, and with it has come a pressing need for automation in all aspects of our lives.

One sector that has been slow to catch on to the automation obsession is the construction industry, particularly construction lending. For too long, builders and contractors were using computer spreadsheets, creating draw sheets by hand and emailing confidential documents to inspectors. Needless to say, this needed to change and the industry is finally using technology that automates these processes.  

AUTOMATING CONSTRUCTION LENDING

Commercial developers, general contractors and residential home builders have started working with lenders who use innovative technology to automate the post-closing administration of construction loans. Accessible from any phone, tablet or computer, this technology eliminates the need for paper files and spreadsheets, lets the developer check on the status from any device and improves the experience for the developer, lender and borrower. People are making better business decisions enabled by real-time text messages showing draw availability and areas of risk.

The best solutions reduce loan administration time by 50 percent or more, lower inspection costs, identify and mitigate potential risks and enhance working relationships through mobile access.

This part of the construction industry has come a long way, but what about the other side of the construction loan process? While lenders and developers are being offered innovative technology to help automate their business, contractors are still working in the dark ages.

HOLISTIC AUTOMATION

For instance, builders continue to pay their subcontractors via paper checks, after collecting paper invoices and paper lien waivers. The subcontractor must then drive to pick up the check, deposit it and wait days for funds availability. In addition, builders are completing 1099 tax forms and other reporting material by hand, which can be difficult and time-consuming.

For these reasons, construction developers, builders and contractors must partner with lenders who are not only using technology to automate the post-close administration of loans, but those who understand that the entire payment process must be automated to be most effective.

Desirable lenders are typically community banks that have implemented new technology to complement the automation tools they are currently using. The new solution is ideally a mobile and web-based service that automates the construction payment stream with electronic submittal of lien waivers and invoices from subcontractors to the builder. This is coupled with electronic payments using same-day ACH that replace checks, much like online bill pay that has made our personal lives easier.

In short, payments are made faster and more reliably. Builders are able to pay their subcontractors instantly, enabling them to focus on building and saving the subcontractors significant amounts of time and frustration. With a more efficient payment process, everyone can concentrate on what they have been hired to do.

Implementing this technology also increases transparency in the payment stream process and reduces unnecessary friction between builders and subcontractors. With mobile access, it is easy to log into the system while on the construction site to check for any errors and assess the status of projects. Subcontractors have all of their payment questions answered by checking their phone, which eases the burden of manual interactions with the builder.

Also, it is safe to say that the best contractors look to work with the best developers, and the best developers try to seek out the best lenders.

Using technology to automate the post-close administration of construction loans is important, but now is the time to take automation a step further. By working with lenders who are also using an automated payment stream tool, construction professionals can speed cycle times and payments, improve communication and focus on their important work at hand.

Written by Matt Johnner – President and Co-founder, BankLabs

BankLabs is a national provider of innovative mobile technology products that help community banks improve efficiency, differentiate with customers, create new fee income, increase deposits and create marketplace options that expand business opportunities. BankLabs believes that community banking is a way of doing business, not a size.

 

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Dallas Innovates: Startup Helps ‘Level the Playing Field’ for Community Banks

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A startup that provides innovative technology to community banks is revolutionizing the process for making construction loans while also arming the institutions with another weapon against their biggest competitors — FinTechs and large multinational banks.

BankLabs, which is equally based in Dallas and Little Rock, was formed as part of Radius Group, a Little Rock, Arkansas holding company, in January 2016. It immediately hit the market with Construct, it’s appropriately named product that enables banks to automate the construction loan process.

BankLabs describes the current procedure used by most banks as a “noisy process” involving spreadsheets, paper files, and emails, creating “unnecessary delays and wasted opportunities to increase profit and enhance customer relationships.” By switching to the Construct app, BankLabs President Matt Johnner of Dallas said banks can improve efficiency by 50 percent.

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