Referral Flow in Consumer and Commercial Lending

by Angela K. Love

I had the opportunity a few years ago to work at a credit union in two positions.  In my first position, I worked as a Business Credit Analyst, and in my second position, I worked as a Branch Manager.  

Working as a credit analyst, I did not appreciate the demands in the consumer lending department but knew the personal finance assistants and officers were expected to send referrals to the commercial lending department.  We received very few referrals at the time.

Several months ago, I met Chuck*, a Vice President of Commercial Lending at a credit union.  We began discussing the challenges of referral flow between commercial and consumer loan departments in credit unions.  Chuck did not have knowledge about working in consumer lending, and I offered to share my experience, and he accepted.

I shared the following with him:

·     Consumer loan officers are encouraged to move quickly through the loan process (i.e. roughly 30 to 45 minutes) to get to their next appointment.  They are trained to use a script.  A meeting for a commercial loan is not scripted, runs longer, and questions start with asking the borrower to share their (business) dreams with answers being very detailed.  The difference between obtaining a consumer loan and a commercial loan is like grabbing food at a fast food restaurant through the drive-thru or going out for a seven-course meal.  The differences are vast, from the business models of both departments to the focus of the conversations.     

·     Consumer loan officers are required to sell complementary products such as warranties and Credit Life & Disability insurance.  A lot of time is not available to mention commercial loan or other products and services.  Also, many consumer loan officers make bonuses or commissions from selling complementary products; whereas, the likelihood of making a bonus or commission from a commercial loan lead is slim.  And, production expectations are structured toward complementary loan products.

·     The commercial lending process is foreign to most consumer loan officers.  Consumer loan officers typically do not have the necessary knowledge to answer questions about commercial loan products, interest rates, required documents, and the process, so they tend to shy away from mentioning them.  Many consumer loan officers are concerned with meeting the scripted criteria expected of them.  

·     The best time for a lender to discuss commercial loan products would be while they are entering borrower information into the computer for a consumer loan product. I found that borrowers would use this time to be on their phones or talk to the person who came with them if that were the case.  It is difficult for a loan officer to maintain accuracy when entering data into the computer while also talking to someone.  This time is essentially deadtime and provides an opening to introduce the borrower to other products and services offered by the company.

I recommended to Chuck that the dead time during the consumer loan process was a missed opportunity. In my experience, many of the borrowers I met were unfamiliar with the vast number of products and services we offered.  However, I lacked the time to share all of the ways our credit union could help our borrower.  I thought about my experience as a vendor at conventions, where there were times when I was not able to share much of the information I wanted to share with customers. I used rack cards to convey my message to attendees when I could not share my message personally with them.  

Credit unions can use targeted marketing during the dead time by guiding the member’s attention using aids such as rack cards.  While the member is waiting for the consumer loan officer to finish entering data into the computer, they can learn more about the credit union.  

Now, I know, many consumer loan offices have the plastic holders that contain flyers, business cards, and rack cards.  In my office, those materials contained information about warranties and insurance.  And, many members did not take any of the information unless I personally handed it to them, suggesting they might be interested. Even when I handed the information to them, they didn’t look at it.  Why? Because I was selling them something, instead of informing them.  Consumers want to be informed.  My husband often repeats the saying, 

People do not want to be sold; they want to buy.
William T. Brooks

I think targeted marketing to inform customers about new information has to be intentional and informational, demonstrating care.  

People do not care how much you know, until they know how much you care.
~ Teddy Roosevelt

 To increase referral flow, intention should change.  First, consumer lenders should be trained to build a rapport with borrower’s that is not scripted, seeking to understand their complete financial story, including if the borrower is or wants to be a business owner.  Second, consumer lenders need to personally offer targeted marketing that applies to borrower’s financial story, not the lending institution’s focus.  And, that information should be provided to the customer during a time when they can look at it and read it such as when the lender is entering data into the computer. Information handed to a customer as they are walking out the door will usually find itself being tossed into the nearest trashcan or thrown into the backseat of a vehicle and forgotten.  Or, information that is not applicable to a borrower’s situation will be ignored.  Third, targeted marketing assumes the information being shared is new information to the customer and should be written with that in mind.  Nothing is more frustrating than when I am given information and have more questions after reading the material than when I started reading.  Fourth, consumer, mortgage, and commercial lenders should regularly share their loan products and services with each other.  Team meetings could be a show-and-telltime where questions are encouraged, and detailed answers are given.  Lenders can only share the information they know and understand.  The lenders can transition responses to customer’s questions to a warm hand off to a commercial lender. 

We don’t know what we don’t know, and we can’t share what we don’t know with others.  

Fifth, a team atmosphere should include each department actively cheering and supporting each other. If lending departments are competing against one another, instead of working with one another, employees are not going to be willing to share information.  Who shares positive information about a competitor to their customer?  No one, unless they don’t like the company where they work.

Chuck and I had a great conversation and he appreciated the information I shared.  He stated he didn’t realize how the consumer lending department operated and that my information gave him new insight to change some of their credit union’s referral strategies.  I hope this information has given you new insight, too!

*Name has been changed to protect privacy