Suncrest Bank, a commercial lender in the Greater Sacramento area, is expanding into the small dollar loan market this year as it looks to build on business gained through the Paycheck Protection Program, according to President and CEO Ciaran McMullan.

Sacramento-based Suncrest is partnering with a local fintech, which McMullan declined to name, to stand up the bank’s small dollar loan platform as Suncrest’s first-ever online loan origination portal. As part of the partnership, Suncrest will incorporate improved data reporting and analytics to help inform the online credit decisioning. Suncrest also provides services for agricultural, commercial real estate and commercial and industrial loans.

Suncrest originated nearly 700 PPP loans worth $160 million, McMullan said, noting that about 25% of those loans were for new business customers. The bank’s strategy is to introduce small dollar loans to retain the capital on the balance sheet while providing small businesses working capital as the government relief funds via the CARES Act run dry.

“If I make a rough estimate, I could see anywhere between 25% to 50% of the customers we help with PPP loans then needing additional working capital support going forward,” McMullan said.

Also read: Fintech consortium boosts Sacramento banking innovation

The $1.3 billion community bank specializes in agricultural land and farm loans — about one-third of the bank’s portfolio is made up of agricultural loans — and McMullan said Suncrest has traditionally been reluctant to launch an online portal due to fears it could hamper the relationships its bankers build with community members, a rapport that he said helps Suncrest compete with bigger institutions.

Also, the small dollar loan marketplace has been a challenging arena for smaller lenders to play in, because “there’s a certain dollar value that makes the return on investment and it’s not typically really small dollar value loans,” McMullan said.

However, the pandemic has been a catalyst for financial institutions to take a second look at their tech offerings and abilities, and more community banks are turning to the “fintechs that have emerged, [which] allows small banks to compete more effectively in the small dollar space,” McMullan said.

As such, the pandemic accelerated Suncrest’s plans to enter the new market, while social distancing and remote working acclimatized Suncrest’s employees to digital banking. The bank’s employees won’t require much training for the new online process, McMullan said. In fact, the new platform should help reach remote clients and farmers, he said, adding that although the bank is considered a community lender, each banker or market representative covers about a 100-mile radius.

The online loan platform is aimed at remote farmers in need of credit who live far away from bank branches. With online and stand-alone platforms, “community banks are solving issues that their specific niche of customers have,” Celent senior analyst Stephen Greer recently told Bank Innovation. “The proposition seems to be a little more focused.”

“We’re competitive by having people embedded in the community, that will continue but I think it’s incumbent on community banks to get better at— and back to — serving those real small businesses, which has become difficult over time because the cost of infrastructure has increased,” McMullan said.

Bank Innovation Build, which will take place Sep. 9-10 as a virtual experience, is a must-attend industry event for professionals overseeing financial technologies, product experiences and services. Register here.