The Expert Solution for Lending, Risk Management, and Analytics

As financial institutions analyze the Current Expected Credit Loss standard (CECL) requirements and begin to run various modeling scenarios in order to ascertain the impact to capital when adopted, some institutions could face substantial adjustments.  On the heels of preparing for CECL, the Economic Growth, Regulatory Relief, and Consumer Protection Act (Relief Act) was signed into law which is considered as a long overdue partial rollback of the Dodd-Frank Act. The Relief Act dilutes some of the stringent regulations imposed by the Dodd-Frank on the U.S. financial system, and is primarily aimed at making things easier for small- and medium-sized U.S. banks. Many of these financial institutions were seen as being affected by the tougher rules in a disproportionate manner compared to their larger rivals. 

This past week I got to spend some time with my younger sons at a Boy Scouts of America camp.  My middle son was involved in a climbing exercise called a “smooth chimney”.  This is one of the harder climbs because you have to basically push yourself up and stay in the chimney with that friction.  During his climb about 30 feet up, he started to get fatigued.  The problem with this climb is that if you stop applying force you either don’t progress, or worse—you fall.

It’s easy to pay the cost for the traditional origination process of middle market credits.  There’s plenty of margin.  But what happens when the size of the business credit is smaller—say $250,000 or less?  How do you generate enough money to pay for originating small business loans?