Bankers already monitor rivals’ loan activity through Uniform Commercial Code filings, but with competition for commercial loans becoming increasingly fierce, a California data-mining company has developed a service that simplifies the act of surveillance.
LeaseLogic Inc. in Santa Barbara launched the California Community Bank Intelligence service last month. LeaseLogic e-mails subscribing banks a list of UCC filings that competitors made for business loan deals secured by equipment, inventory, or assets other than real estate.
The filings contain the names and contact information of the businesses that took out the loans. For an additional fee, banks can access LeaseLogic’s database to read any loan documents attached to the filings, to get more detail on the terms.
“This service allows banks to target their competitors’ customers, because they are oftentimes the most qualified prospects,” said Benjamin Kennedy, the chief executive of LeaseLogic. “It also helps banks better know their market share and switch rate.”
So far half a dozen community banks are using the service on a trial basis, Mr. Kennedy said, though he would not name them. The service is restricted to UCC filings on loans made in California, but LeaseLogic plans a nationwide rollout within 12 to 18 months.
Scott Loux, a commercial loan pricing consultant with Sheshunoff & Co. Investment Banking in Austin, said that in a slowing economy, quality loans will get harder to find, so anything banks can use to get an advantage would be helpful.
“This will be one of those things that will take time to build momentum, though,” because banks typically negotiate loan terms with borrowers, Mr. Loux said. “But the bank also has to make its profit, and part of that is helping the borrower understand the value the bank brings besides a bag of money, such as being a business adviser. This service can go hand in hand with that type of negotiation” by giving banks an idea of how their competitors have negotiated deals.
“Once one or two banks do this, I think it will gain momentum, because banks will see that their competitors are looking at them,” he said.
David Taber, the CEO of the $574 million-asset American River Bankshares in Sacramento, said his lenders currently search manually through UCC filings by ZIP code to find commercial loan leads, so he would consider subscribing to this type of service, because it could speed things up.
“We never want to talk badly about our competition, but if we knew whether the competition was a big bank that requires customers to call an ‘800’ number, then we might say, ‘Our CEO is right here, and here’s his direct number should you ever need his services,’ ” Mr. Taber said.
Customers can get daily, weekly, or monthly reports, and the pricing depends on the number of lenders and counties monitored. For example, a bank that wanted to monitor 10 competitors in three counties for 12 months would pay about $4,470 for 260 reports, or $17.19 per daily report. The database access is $249 a month.
Thomas Hawker, the CEO of the $1.9 billion-asset Capital Corp. of the West in Merced, Calif., said such a service may not be necessary for all types of commercial lenders, since most find good leads with more conventional methods (such as attending local chamber of commerce events), which also give them better opportunities to foster relationships.
A database of UCC filings may prove useful for asset-based lenders more dependent on knowing the value of the underlying collateral, Mr. Hawker said, but it may be too laborious for other types of commercial lenders.
“Just trying to track every borrower filing a UCC in a metropolitan area could take up more time than it is worth,” he said.
Besides, “if I see that a prospect has had a UCC filing, it is too late to get the loan. It is far better to get to them and solve their need than find out after the fact.”
Still, Paul Menzel, the president of Leaf Third Party Funding, a Santa Barbara unit of the asset-based lender Leaf Financial Corp., contends that information from UCC filings can yield worthwhile leads. Just knowing the maturity date of business loans can make marketing more effective, he said.
“I think the leasing industry has been ahead of the curve in using UCC filings for marketing purposes,” Mr. Menzel said. “Aggressive and savvy banks can use this information to direct market to their competitors’ customers.”
