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Q3 2023 Lending Climate | Strategic Insights for Alternative Funders

Your Guide to Seizing Alternative Lending Opportunities

This month, we're looking at the latest Senior Loan Officer Opinion Survey (SLOOS) results from Q3 2023. It's packed with info that alternative lenders and tech-savvy financiers need to know.

Tighter Lending Standards and Weaker Demand for Business Loans: Survey respondents indicated that there was a general tightening of standards and a decrease in demand for commercial and industrial (C&I) loans across businesses of all sizes in the third quarter of 2023. This trend was also observed in all categories of commercial real estate (CRE) loans.

Stricter Standards for Household Loans: Banks reported tightened lending standards across most types of residential real estate (RRE) loans, except for government residential mortgages, which largely remained unchanged. The demand for RRE loans, including home equity lines of credit (HELOCs), also weakened.

Changes in Credit Card and Auto Loan Approvals: Banks were less likely to approve credit card and auto loan applications for borrowers with FICO scores of 620 and 680 compared to the beginning of the year. Conversely, there was an increase in the likelihood of approving credit card loans and a stable trend in auto loan approvals for borrowers with FICO scores of 720.

Reasons for Changing Loan Standards: The most frequently cited reasons for tightening lending standards included a less favorable or uncertain economic outlook, reduced tolerance for risk, deterioration in the quality of loans and collateral values, and concerns about funding costs.

3 Strategic Insights for Alternative Funders

We've noticed a trend: banks are tightening loan standards. 

It's a clear sign of a more cautious market. As leaders, you know that understanding these shifts is crucial for staying ahead. It's strategic - not just a response to current events but a step towards sustainable growth.

We're seeing wider gaps in loan rates.

This matters because it affects borrowing costs, especially for larger loans. It's a cue for alternative lenders like you to stay alert and adapt.

Demand Fluctuations: Your Opportunity

There's a dip in the demand for commercial loans. Traditional banks may see this as a slowdown, but for you, it could mean a chance to step in and meet market needs innovatively.

Harness AI to Revolutionize Your Underwriting Process

AI is transforming the financial landscape, and your business shouldn't be left behind. I made this video to guide you through our cutting-edge financial credit risk modeling tool.

It is a powerful tool designed to streamline your underwriting process. With a focus on identifying fraud risk and assessing repayment capabilities, this AI-driven solution is a game-changer for lenders.

Key points you need to know about the software

Efficient Risk Analysis: Using AI, you can quickly analyze multiple businesses for fraud risk and repayment ability. This is vital for handling bulk applications.

Comprehensive Data Integration: The tool incorporates data like past deposits, withdrawals, and court judgments into its analysis, offering a 360-degree view of each applicant.

Intelligent Insights: AI provides detailed assessments, flagging concerns like mismatches in business names and tax identification numbers, which could indicate potential fraud.

Real-time Examples: I demonstrated the tool using sample businesses, showing how AI evaluates factors like cash flow, business activity duration, and FICO scores to determine lending risk.

Future Developments: This is just the tip of the iceberg. Cobalt Intelligence is committed to continuously enhancing AI capabilities to better serve your underwriting needs.

If you have questions, feel free to reply to this email!

- Jordan Hansen
CEO of Cobalt Intelligence (Beyond Banks)

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