No matter what type of financial services organization you manage, loan origination software can help streamline workflows, improve risk management, and optimize your business for growth. Credit unions, fintech companies, mortgage lending companies, and financial institutions that focus on small business lending and commercial real estate loans can benefit from the automation that loan origination software brings to the table. If you’re a startup company, automation can give you an immediate edge in the highly competitive field of business lending. If you manage a large bank, loan origination software can help you stay relevant in a world where customers demand a friction-free customer experience.

But what does automation actually mean in the context of loan origination software? In short, it’s the very heart of it. Loan origination software automates virtually every step in the lending process, from application to credit scoring to underwriting to final funding.  Automation lends value throughout the loan lifecycle.

Let’s unpack the loan origination process—and loan origination software—a little bit and see how automation drives more and better business for you. We’ll provide key questions to ask when evaluating loan origination platforms and give you a basis for comparing multiple commercial lending solutions

Automation in the Loan Application Process

Every loan decision starts with an application. As a lender, your job begins with collecting a lot of financial information from a borrower: tax returns, proof of employment, bank records, and more. You may request to review a small business’s business plan. All of this information will help you evaluate a borrower’s creditworthiness. Of course, you also have to comply with KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations. First things first.

The application process, when it’s performed manually by a loan officer, is fairly labor intensive. It results in the creation of a physical file for each customer. Customer files may contain handwritten forms and printed copies of electronic documents. Scribbled notes, too. And you know how files are: they pile up on your desk and make you anxious. And in the end, this data has to be entered manually into your electronic systems. It may have to be re-keyed in multiple places, which increases the likelihood that mistakes will happen. Mistakes beget more mistakes and, before you know it, none of the data in your electronic customer files can be trusted and you have a big mess on your hands. All due to manual processes.

Automation changes all of that. Once data is entered correctly the first time, It will flow consistently and accurately through your system. Loan origination software literally puts your entire small business lending team on the same page: a shared dashboard that is updated in real time. Automation also empowers loan officers to process more loan applications in a shorter period. And you’ll see that automation boosts productivity at every juncture in the loan process.

What to Ask Lending Platform Providers: How does this platform streamline the commercial loan application process? Can you estimate the efficiency gains your system will deliver? How will it improve accuracy and keep me compliant?

Automation That Integrates Information from Multiple Sources

Successful commercial lenders amass a great deal of institutional knowledge over time.  Chances are you’re accustomed to accessing data from many trusted sources, including one or more credit bureaus. A loan origination platform shouldn’t disavow your experience or trusted resources, but rather preserve what’s been working for you.

Most automated lending solutions include customizable APIs (application programming interfaces) that facilitate cross-communication between the platform itself and other applications and databases. They build on the functionality of your existing systems. These APIs automatically integrate data from major credit bureaus and credit information aggregators like FICO.  They simplify processing the kinds of loans, such as Small Business Administration PPP and 7(a) loans. They also connect with your CRM system to automate critical correspondence between financial institutions and borrowers. Why is that so important? Because borrowers who are kept up to date on how their loan applications are proceeding are happy customers. No one wants to be in the dark when the growth or survival of their business depends on it. Digital lending platforms can power your marketing efforts, as well, by turning customers into repeat customers.

What to Ask Lending Platform Providers:

  • How does your platform integrate with my legacy systems?
  • Does your platform offer off-the-shelf or customized APIs that automatically connect me to the information I need to make smart decisions?

Automation in Determining Creditworthiness

A credit score can only tell you so much about a borrower. Your institution needs a digital lending solution that delves deeper into a business’s financial history and habits. Look for a solution that delivers outstanding insight—insight that allows you to create accurate up-to-the-minute customer profiles.

For example, look for a platform that includes tools for real-time cash flow analysis throughout the loan underwriting phase of your lending process. Loan origination software can be customized to alert you to signs of risky behavior on the part of a borrower. Ongoing reporting can mean the difference between a profitable decision and a loan default.  

How a platform presents risk-analysis data on a borrower can simplify or complicate underwriting. Choose a platform that aggregates information and gives you access to complete credit score cards via a single, easy-to-read dashboard.

What to Ask Lending Platform Providers:

  • How does your platform provide the insight I need to make better credit decisions?
  • Does it offer advanced credit and risk analysis tools? 

The Role of Artificial Intelligence in Automation

Loan origination platforms may use artificial intelligence at various points in the lending process. The first may be when onboarding new customers. During this stage of the process, borrowers grant secure temporary access to lenders to sensitive data. Sharing information digitally reduces the risk of sensitive data falling into the wrong hands. Confirmation of data availability is also automated. This can save a lending institution’s staff hours worth of follow-up time, allowing them to process loans more quickly.

Automation also helps give borrowers who have historically been denied credit based on human bias a fair shake in the lending process. Automation makes the loan decisioning process more objective. It also allows lenders to consider a broader range of data points when evaluating a borrower for risk. The result is an increase in low-risk loan approvals for a more diverse group of borrowers.

The use of artificial intelligence in risk management also gives lenders a leg up on recognizing fraudulent behavior on the part of borrowers, early on in the lending process, before too much damage is done.  AI recognizes and flags signs of fraud that humans may miss and can automatically reject suspect loan applications.

What to Ask Lending Platform Providers:

  • Does your platform employ artificial intelligence? At what point(s) in the lending process?
  • What are the benefits of AI?
  • Can I control how and where artificial intelligence is used in lending decisions?

Automation That You Control

Every lending institution is unique. Your company has invested years in developing its secret sauce: the combination of data points and rules that determine whether a borrower should be approved for a loan, for how much, and at what interest rate. If you love your secret sauce and don’t want to change it, great! Loan origination systems can automate the application of your special blend of decision-making rules and allow you to process loan applications more quickly than ever before. The best platforms are customizable and let you decide which aspects of loan decisioning to automate. They also include tools to make processing Small Business Administration loans simpler.

Scalability is one of the chief benefits offered by SAAS lending solutions. Automated decision-making helps your existing underwriting staff power through more applications. In the case of Biz2X’s platform, you may gain as much as 40% workflow efficiency.

But perhaps your risk management strategy hasn’t been as successful as you hoped it would be. Underwriting parameters are cumbersome to rewrite. So yours don’t reflect recent changes in the economy, the lending industry, and real estate markets. It’s time to update your underwriting standards and loan pricing and stay in step with market trends. An effective loan origination platform automates making wholesale changes to your strategy.

What to Ask Lending Platform Providers:

  • Can I customize underwriting rules based on my own institution’s preferred standards? How easy is it to change rules?
  • Does the platform accommodate automatic approvals and knock-outs?

Automation Can Improve Your Loan Decision-Making Process

Loan decisioning is part art and part science. You need verified, well-organized data to calculate risk, but you also need to be free to exercise your judgment. The best loan origination platforms afford you both by virtue of automation and integration. Informed by artificial intelligence, automated lending software lends speed and accuracy to the underwriting process and allows lenders to increase the size and profitability of their loan portfolios.