There are numerous software programs available in the contemporary commercial lending market that meet the needs of both traditional and non-traditional lenders for loan origination and credit assessment. Financial organizations are becoming more conscious of enhancing the loan underwriting process to improve client satisfaction and efficiency, decision-making speed, and productivity.
Where the Banks are Struggling
Many lenders still follow manual and paper-based loan approval processes today, which seem out of date in a digital age. As a result, they take longer to make decisions than many clients would want, and they have difficulty with internal data management, which adds to bankers’ workloads and obscures information for both management & external examiners.
Commercial loans can vary in complexity and size. Let’s use spreadsheets, one of the most popular manual underwriting techniques, as an example of the problem facing lenders today. Spreadsheets are excellent tools and maybe the best “go-to” piece of software available today. However, it was unlikely that the application’s designers had loan underwriting in mind when they created it.
Spreadsheet underwriting of credit in any form can be difficult. Data entry can take a lot of time and could eventually become inconsistent. There are instances where data entered into a spreadsheet is repeated directly into a lender’s other key systems, double work, and produces duplicate records of the same data. Hence, it impacted the loan decisioning process in the end.
Is Automation a Help?
Credit Analysis
The dissemination of the financial data you have obtained from your prospect or customer, normally another manual and repetitive operation, is one of the most crucial aspects of the commercial risk assessment process.
How much of the loan process are you now automating? Surprisingly, only 31% of bankers who responded to the poll claimed that they used automated tools for credit research and decision-making, and 50% of bankers said they used none at all.
What role can automated loan document software play in assisting the credit analyst in producing precise financial spreads that serve as the foundation for risk evaluation and lending inclination?
Modern loan origination software includes improved technology that, with the right permissions, enables the lender to communicate with its business customers’ systems via a web interface.
For instance, it can pull the pertinent financial information from tax returns, accounting software, and other documents needed for a credit risk assessment.
The procedure can be completed nearly instantly, giving the lender enough time to pre-screen, score, and make reliable credit decisions for the borrower.
The main advantage of automated financial spreading and electronic data collection is that it gives analysts more time to focus on risk analysis. For example, ratio analysis, data interpretation, and forecasting models may be used to assess the borrower’s financial risk and loan repayment capacity.
Using tools that instantly supply crucial risk indicators for loan evaluation, such as the probability of default (PD) and loss given default (LGD) models. Automated risk rating based on these models can also be a part of credit analysis.
A loan underwriting process needs to be effective and fast to make your bank survive in this competitive environment. Only automation can help you and make you competent enough.
