Document processing is a challenge for many financial institutions. They’re always looking for solutions that take some of the complexity and errors out of the loan origination process. Automated business loan document management software (DMS) does just that. This convenient solution not only provides crucial tools for streamlined collaboration with customers but also digitizes, organizes, secures, and offers quick access to the files and documents you need to better manage the entire loan approval process.

Automation, of course, eliminates most of the errors typically associated with manually processing loans. For business banking lenders, the right loan document management system streamlines and accelerates the workflow and underwriting of small business loans, offering a better experience for borrowers and lenders alike. Automated document management improves functionality, requiring fewer follow-ups for missing information and allowing more loan applications to be processed in less time.

As you well know, business lending is significantly more complex than consumer loans like mortgages. Businesses use various methods to record, report, and share documentation with a lender when applying for a business loan, making the loan process more prone to mistakes. So it’s critical for business lenders to have a reliable solution that makes loan approval fast, efficient and error-free. That’s where document management software comes into play. Let’s see how this works.

Document Management and the SBA Loan Process

The Small Business Administration’s (SBA) lending process is a good test of how important the right document management system is for lenders. The SBA has a reputation for putting borrowers off with its extensive application requirements. From loan application to loan closing, the SBA lending procedures require SBA lenders to acquire and verify multitudes of documentation at all process stages. The upside is that only the most qualified borrowers make it through to approval. But these loans are quite expensive to make, and it’s difficult for lenders to make many of them.

Typically, the SBA loan process can take anywhere from a few weeks to a few months, depending on the records management of the borrower and the document management solution used by the lender. Starting with the gathering of the documentation, SBA preferred lenders require applicants to provide:

  • A personal background statement that includes all previous personal and business addresses, current and past names of applicants, any criminal records, educational backgrounds, and more.
  • Resumes of all business partners and co-owners.
  • A business loan request letter that includes the amount of money requested, why the lender should grant the loan, use the loan, and how the loan will be repaid.
  • The length of time the business has been active, and the size of the company.
  • Personal credit reports of all partners and co-owners.
  • A business credit report.
  • A formal business plan with financial projections and goals.
  • Two to three years of personal and business income tax returns.
  • Two to three years of financial statements (profit and loss statements, balance sheets, debt schedules).
  • List of collateral (if needed).
  • Numerous legal documents, such as business licenses and permits, articles of incorporation, supplier/vendor contracts, automobile leases, and real estate documentation.

Once the borrower gathers and submits the required documentation (which could take up to a month), they are naturally impatient when waiting for their notice of approval. However, the underwriting process is just beginning. Depending on the lender and the loan size, the SBA loan process could take 60 to 90 days—a timeline that could be cut drastically with the right document management software.

What to Look for in a Document Management System

A loan document management system is a workflow automation tool that helps streamline every step of the lending process, from paperless loan application to closing. Think of it like a file storage platform, except it is tied into the lending workflow. An advanced DMS has automated document parsing, making analysis and underwriting easy. It also makes it convenient for the lender to have ongoing data refreshes when needed instead of manually asking for additional documentation. For example, bank statements are automatically pulled in each month, so there’s always a current view of the customer.

The right automated loan document management software lessens the painstaking and time-consuming collection and verification requirements, calculates interest rates, supervises payments, and offers valuable insights.
While all document management systems enable lenders and borrowers to digitize and organize documents, make sure your system of choice has the following:

Sharing and Collaboration: Although the central function of an automated document management system is digitization and organization, document management software should also allow lenders, underwriters, and borrowers to share and analyze files simultaneously if needed, or lock a document, so only one user at a time has access.

User Permissions: Likewise, document management software should allow administrators to establish role-based user permissions to restrict or allow only specific users to view or edit files.

Automated Accuracy: Look for an automated system that can analyze documentation by rules written into the software that prevent inaccurate underwriting procedures. Software like the Biz2X Bank Statement Analyzer also sends messaging alerts to bankers and customers, notifying users of potential problems at the outset before getting too far into the process.

Data Security: Customers count on their lenders to secure their sensitive company information, so look for a highly respected system equipped with sophisticated encryption and compliance tools. Ask about automated security updates and backup tools.

Usability: Finally, do not discount the importance of the usability of the software system. Fancy bells and whistles won’t matter to borrowers and loan officers if the system isn’t user-friendly. Look for an automated document management system with a free trial, so you can test and work out any kinks before investing in it. Ask for references and discuss the system’s positives and negatives with past users.

Easy to Audit: A DMS also makes pulling historical reports easy and convenient for lenders to perform reviews periodically.

The Benefits of Automated Document Management Systems

Lenders and borrowers must do a lot of due diligence before the loan process closes and the business gets its funding. A document management system can save your financial institution many hours searching paper files and doing document analysis. In addition, compliance controls for business documents can be complex and challenging. Automated document management helps avoid costly mistakes enabling you to reach the final goal of loan approval faster and with less risk.