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Why construction loan risk management software is so valuable

Abrigo
September 21, 2022
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Driving efficiency and reducing risk

Construction loan risk management software leverages technology and sound process management to pull construction lending away from its manual roots.

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Building a stronger portfolio
Construction loan risk management: Then & now

Years ago, lenders used spreadsheets and manually entered calculations in order to keep up with the complex and tedious details of each and every construction loan they managed. It could take days to receive inspection details and approve draw requests. Fast forward to today, where financial institutions can have custom reports at their fingertips and inspectors can submit details from the construction site through their construction loan risk management software.

Construction loan software was created  to streamline the construction loan management process, so bankers could spend less time on spreadsheets and get back to serving their communities. With automated draw exports, budget calculations, and inspections, bankers are adding days of interest income back to each draw. At the same time, financial institutions are seeing a stronger relationship with borrowers, builders, and other stakeholders that appreciate having an efficient, easy digital solution to work with.

Modernization

The days of waiting a week for draw approvals and inspections are gone. Financial institutions are now using construction loan management software to streamline their draw approval process. A digital workflow accelerates draw cycle times, providing approvals days faster than the manual process and can increase draw interest by 8-12%. 

Automated inspections also accelerate the draw approval process. They instantly provide bankers with the information they need to confirm the progress required on a project so they can fund a draw request quickly. This can add additional days of interest income to every draw. These features, combined with digital notifications, are helping financial institutions streamline and modernize their construction loan management process. 

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Construction loan management software
Managing construction loans effectively

The amount of manual data entry needed to manage a construction loan portfolio can be daunting, not to mention ineffective. when a financial institution is relying on traditional spreadsheet-based systems. Without constant analysis, problems can arise within a spreadsheet without an admin noticing. Construction loan management software imports budget and loan data directly so that staff in loan operations don't have to re-enter data into the system. The ability to upload loan data saves time and reduces the risk of human error, contributing to improved construction loan risk management.

Automatic budget calculations automatically calculate remaining budgets based on draws, further reducing the risk of human error and allows lenders to spend less time doing manual calculations. 

Construction Loan Management Benefits

This type of lending is a significant portion of many financial institutions’ portfolios. Construction loan management tool benefits include:

– Maximizing ROI by taking days off of your turnaround time.

– Mitigating risk by providing detailed audit trails and real-time alerts. Spreadsheets can’t alert you when a loan is overfunded.

– Improving the experience with borrowers, builders, and other stakeholders by offering an easy-to-use mobile solution.

One of the features of a construction loan management tool that contributes most to construction loan risk management is that the software provides a detailed audit trail for each property and real-time reporting for an institution’s construction loan portfolio. This allows for efficient and informed oversight from an executive level. For example, with automated custom reporting, the click of a button yields a real-time look at a bank’s construction portfolio, decreasing risk and helping institutions make faster business decisions. 

 

Construction lending growth
A high-risk lending area ripe for change.

Construction lending, traditionally a high-risk industry, is ripe for change and digital transformation. Construction loan management software maximizes risk mitigation for financial institutions. In fact, auditors love automated construction loan management. It helps reduce risk by providing a detailed audit trail and real-time alerts to users. You have 24/7 access to construction loan monitoring on any mobile device.

Finally, construction lending is growing. Unfortunately, it can be time-consuming, manual, and risky for lenders, especially as a financial institution grows. Construction loan management software can solve this by automating the workflow, providing real-time analytics, and helping avoid costly mistakes.

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About the Author

Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo’s platform centralizes the institution’s data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth. Make Big Things Happen.

Full Bio

About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

Make Big Things Happen.

 

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Abrigo acquires construction loan management solutions

Coupled with our lending suite, Construct and +Pay from BankLabs enable end-to-end automated residential/commercial construction loans.

Read the press announcement

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