Regions’ latest partnership will increase loan opportunities for underserved businesses.
A unique partnership between Regions and two other companies could be the start of even bigger things for the company.
A partnership that has been ongoing for more than a decade between Regions Bank and TruFund recently became the latest avenue for Regions to tap into financial technology.
Regions (NYSE: RF), TruFund and online lender Fundation Group struck a deal to work together on a new initiative to provide small-dollar loans for underserved small businesses.
It’s a deal executives say could lead to even more tech-based offerings from Birmingham’s largest bank.
The new agreement will allow small businesses that may not be eligible for traditional bank loans to have access to small loans for working capital or expansion activities. Using Fundation’s platform, small businesses could access funds in as little as 48 hours from their applications.
“This is taking something we were already doing and bringing it into the digital age,” said Joe DiNicolantonio, head of Regions Business Banking. “We have worked with TruFund for over 10 years now, and this was a great way to bring a service to our customers that was much-needed.”
Regions has been working with TruFund since 2002, and inked its deal with Fundation in October of last year.
While Regions doesn’t have a public dollar target for the program, the company told the Birmingham Business Journal that the intent will be to provide microloans between $15,000 and $50,000 through the agreement. Fundation will make the loans, with Regions purchasing them on the back end. TruFund does not currently offer those smaller dollar loans.
DiNicolantonio said the new agreement gives Regions the ability to strengthen small businesses in the communities in which the bank serves.
“What this relationship does is give more access to capital in the communities we serve, and meets the needs of these small businesses,” he said.
DiNicolantonio said when the bank finalized a deal with Fundation last fall that 20 percent of small business owners in the U.S. are already turning to online lenders to meet their credit needs.
In addition to expanding loan product offerings and methods of delivery for businesses, DiNicolantonio said the partnership will also cultivate long-term revenue and loan growth opportunities for Regions.
Boosting revenue and loans is something analysts have regularly said is important for Regions, which has been able to boost its profits in recent years largely on the strength of reduced expenses.
The agreement is one of many ways Regions and other Birmingham banks have embraced financial technology and online lenders. BBVA, the parent company of Birmingham’s BBVA Compass purchased Simple – a major player in the online banking industry – in 2014, and recently took a 29.5 percent strategic partner stake in Atom, the UK’s first mobile-only bank.
Financial technology has been one of the methods banks such as Regions and BBVA Compass have been able to grow outside of Alabama, and reach a broader customer base.
DiNicolantonio said all of the deals similar to this one are made with customer demand in mind.
“We did a lot of due diligence with this,” he said. “Just like everything else, this came about after we identified a need. We spent months looking at data and what the need was and where we could go with it.” DiNicolantonio added that he believes the success of this new partnership might clear the way for more such technology-driven financial products with the bank.
“We do think this is a progression and something that can be leveraged into something bigger,” he said.
Stephen Yoder, assistant professor at the University of Alabama at Birmingham and of counsel at Balch & Bingham, said he thinks you’ll see more similar agreements pop up in the banking world.
“When gathering deposits was more important to banks in the early 2000s, banks had arrangements for brokered deposits. Now that loans are more important and there are a growing number of online, nonbank lenders, it makes sense that banks would join forces with them to find borrowers,” he said. “The fintech companies need the banks because they usually lack capital.”
Fundation combines the benefits of a bank loan with the ease and efficiency of an online lender. We offer conventional loans with competitive rates to businesses with varying credit profiles. Our technology allows us to deliver capital in as few as 3 business days through streamlining the collection and evaluation of customer information and conducting the majority of the lending process electronically. As a direct lender, we use our own capital to originate and hold the loans we make, so that we can focus on building relationships with our customers. Our dedicated customer relationship model enables us to understand each unique borrower’s business. This level of service, coupled with our best-in-class products, is why many of our customers come back to us repeatedly for more capital.