How To Streamline Loan Origination With Software

Processing a business loan takes a lot of work. Lenders have to sort through applications, evaluate risk, perform underwritings, and more.  

To streamline this process, small business lenders should leverage loan origination software. It makes lending more efficient and provides a better user experience for the borrower.  

In this article, we’ll go over the challenges in traditional commercial lending, which lending steps that can be automated, and why more and more commercial lenders are adopting loan origination software.

Let’s get started!

Challenges of Traditional Commercial Lending

Traditional commercial lending faces a lot of bottlenecks. For one, many lenders still use manual, paper-based methods to sort through and approve loan applications. The constant back and forth slows down the decision-making process and makes it harder for businesses to get the financing they need. 

On top of that, borrowers don’t want to feel pressure to use a particular lender. Instead, they want to evaluate and compare different lenders from a distance—ideally from home. That way, they can make the best decision for their business. 

Automation in Commercial Lending

Ever since the COVID-19 pandemic, we’ve seen a rise in automation. Technologies like artificial intelligence (AI), machine learning (ML), and application programming interfaces (APIs) are streamlining business processes across many industries. Companies such as BankPoint are revolutionizing the industry with sophisticated solutions that bring efficiency and accountability in a scalable capacity.

The same is true in loan origination. We’re seeing loan origination software streamline every step of the lending process and prove that tech is an asset, not a threat. Here are all the steps in the loan application and loan servicing stages that can be automated:

Loan Application

  • Application—Lenders can create a digital loan application that borrowers complete online on their own time. Start with an application template and customize the fields and boxes you want borrowers to fill.
  • Risk evaluation—Automate credit evaluations to minimize lender risk. Loan origination software can run credit reports automatically to help you eliminate unqualified borrowers.
  • Underwriting—Once you have a full picture of a prospective borrower, loan origination software can automatically underwrite the loan if it meets the criteria you set. 
  • Approval or denial—Loan origination software can send automated emails to applicants once you’ve made a decision on the loan.
  • Signatures—Use e-signatures to finalize the loan agreement and reduce the time it takes to start the loan servicing.

Loan Servicing

    • Loan funding—With the rise of fintech, transferring funds to your client is easier than ever. Loan origination software can integrate with fintech solutions to speed up loan funding.
  • Statements—After compiling the necessary client data, loan origination software can automatically send digital statements to borrowers. It’s faster and helps the environment by saving on paper and snail mail delivery. 
    • Payment reminders—Loan origination software can send automatic reminders to clients a few days before payments are due. That way, you limit late payments. 
  • Payment collection—Collect payments with an autopay system. Loan origination software can allow clients to connect their bank account for automatic withdrawals.

The Benefits of Loan Origination Software 

Now that you know which lending steps can be automated, let’s go over the benefits of adopting loan origination software:

  • Better data

Loan origination software keeps all your data and documents in one place. This gives you more transparency and keeps everyone on the same page. It also helps you track important metrics like conversion rates. 

  • Fewer errors

As skilled as loan offices are, there’s always a chance they’ll make a costly miscalculation. Loan origination software eliminates human errors, so you can have more trust in all your lending decisions.

  • Faster processing

Loan origination software eliminates time-consuming manual processes by automating reporting, statistics, and all the lending steps we already went over. This means you can process more loans faster.

  • Increased scalability

Loan origination software lets you scale deal volume. By saving on overhead costs like personnel, training, and physical bank locations, you can process more loans. Easily go from 10 to 100 loans in no time.

Final Thoughts

Though you’ll always need a human to overlook the lending process, loan origination software makes the process far more efficient. So it’s only a matter of time before it becomes a permanent feature in modern lending.

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