Inefficiencies in loan origination make it difficult for many community banks and credit unions to grow small business lending or member business lending profitably. However, many of these institutions focus on business lending for loan portfolio growth. Here are some unique challenges that banks and credit unions will need to address in order to grow their business lending portfolios profitably.
1. Document collection: A crucial part of any loan origination process is collecting the necessary documents from the borrower. However, document collection is one of the main inefficiencies in business loan origination. With traditional loan processing software, the borrowers’ only options for submitting documentation are to either travel to the bank to submit documents in person or to mail the documents. Both of these options are expensive and inconvenient, and should the borrower forget some documentation in the first submission, they will have to repeat the process. In addition, lenders spend time tracking documents and following up with the borrower to request missing documents. By leveraging an online loan origination system (LOS), banks and credit unions can receive documentation from the borrower via a secure online upload. This saves time for the borrower and the lender and makes it easier to ensure complete loan documentation is submitted in a timely fashion.
2. Cumbersome data entry: The next step in the loan origination process is entering the data into the bank or credit union’s system for analysis and spreading. For small business lending especially this can be a slow, complex process, as there are often multiple years of complex tax returns, both for the business and the owners, business financial statements and other miscellaneous documentation. Entering all that data by hand, potentially multiple times, opens the lender up to errors that delay or derail the lending process. Loan origination software that automates data input saves time and minimizes keying errors. This eliminates one of the most-often cited obstacles to business lending.
