Is virtual banking the wave of the future?

Posted On February 24, 2023

What is a virtual bank? And when might one be right for you?

The short answer, Megan Owens says, is that it’s a bank that doesn’t have brick-and-mortar branches. And if you’re a small business owner looking for a loan, Owens has just the bank for you.

“The way of branch banking is going by the wayside,” said Owens, who works in Mergers & Acquisitions for Live Oak Bank, a completely virtual bank that specializes in Small Business Administration loans. “We see internet banking, virtual banking, coming to our customers’ offices, as the wave of the future.”

Owens, our guest in the latest episode of “What’s Working with Cam Marston,” says that Live Oak’s businemegss model grew out of trying to protect itself while launching the bank during a recession in 2008.

“Live Oak took a unique strategy that really led to the foundation of our culture, which they decided the goal was that we were going to build a bank based on SBA lending,” she said. “They identified that was a gap that was out there with traditional bank lending. So they decided to look historically to see what industries had the lowest default rate in SBA. To play it safe, we were going to start with those industries.”

They found that the small businesses with the lowest default rate were veterinarians, so they initially specialized in lending to that type of business. When that proved successful, they added the small business with the next lowest default rate, dentists.

“That worked so well, it led to us becoming a virtual bank,” she said. “They decided, we’re going to fly to the clients, we’re going to go to the trade shows, we’re going to develop those relationships.”

Now, Live Oak Bank serves a wide range of businesses, from healthcare to self-storage to chicken farms, and has also grown beyond just SBA lending. It operates in all 50 states and, aside from those who work in its Wilmington, N.C., headquarters, all its employees work from home, traveling to meet their clients whenever face time is needed.

“Playing it safe became our model,” Owens said. “We replicated that industry-specific model over and over again until we had about 35 of those industry-specific verticals and had become the No. 1 SBA lender and had really achieved what they set out to do.”

In Owens’ role at Live Oak, she works with clients who see potential in growth through acquisition, helping them identify prospects and put together projections to make sure such a move will help them meet their growth goals.

Awareness of acquisition as a path to growth has grown in recent years, she said, and the “silver tsunami” of Baby Boomer retirees is resulting in plenty of prime prospects. Owens said up to 75 percent of Baby Boomer business owners who are ready to retire don’t have a solid succession strategy.

So if you think an acquisition might be beneficial to growing your business, get in touch with Owens. She’ll even come to you, because even though Live Oak is a virtual bank, she likes to look her clients in the eyes.

“We’re looking for people with the eye of the tiger,” she said.


Categories: Blog, Financial Services, Podcast, Succession Planning, What's Working with Cam Marston