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Understanding the borrower’s financial history: The key to lending in 2018

August 9, 2018
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In the effort to win loans, understanding the borrower’s unique financial circumstances is a must, despite being an often rushed stage of the lending process. In order to make sound lending decisions without stressing about the probability of default, and in turn decreased defensibility for examiners and auditors, it’s important to focus on gaining a holistic view of the borrower.


Implement a customer relationship manager (CRM) that fits the needs of your financial institution. A sufficient CRM provides financial professionals with an organization and accountability tool, allowing more time to develop a deeper understanding of the borrower on a human level and of the customer’s financial relationships. While maximizing the value of building relationships, community banks can also gain a level of insight into the borrower’s global cash flow that can only be accessed within a CRM.


Stay on Track and Organize Customers Efficiently

Daily, monotonous tasks such as sending exception letters or requests for financial documents can easily be automated through a CRM. Furthermore, financial professionals gain the ability to recognize when a customer has been touched one too many times. Imagine this. You’re working with a junior loan officer on an important commercial loan request. The potential borrower seeks a line of credit for his shoe store and submits his tax returns to the other loan officer on the account. You aren’t alerted about this and end up requesting for the same tax returns twice before learning of the mistake. According to Salesforce, it takes 12 positive service experiences to make up for just one negative experience. Not only does this bother the borrower, but it displays a lack of organization within the financial institution.

Track Customer Engagements and Recognize Opportunity

Record automation takes the human element of error out of record-keeping and puts the human element back into relationship lending. Through a CRM, lenders gain insight into a borrower’s global cash flow or relationships within the community. For example, financial advisors can see that Jerry, the local grocery shop owner, has had a commercial mortgage with the credit union for 10 years and is also part owner of the fish market across the street with his brother Larry.

In addition, keeping an updated central record of customer engagements makes it much easier to recognize and monitor trends within the institution. A central record provides a way to benchmark lending data against similar borrowers and gain a better understanding of the potential profitability of the relationship. Any defensible methodology to better explain assumptions to auditors and regulators should be explored. Tracking these trends also opens up the possibility of recognizing potential new opportunities to help the borrower, whether it’s something as simple as opening up a savings account with the institution or taking advantage of special relationship pricing.

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Develop Trust from the Customer

Trust between a borrower and lender is invaluable in the banking industry. Going the extra mile and treating a customer right from the beginning will often pay dividends later through continuing partnerships and genuine customer referrals to friends in the community. In fact, 42 percent of consumers will tell friends and family about a positive experience according to Deloitte. In order to capitalize on this trend, individual effort and a CRM are essential. Trust and commitment from borrowers cannot be understated as a home, car or commercial purchase is often the largest of their lives. This means credibility, honesty and consistent communication from the borrower is a must. A CRM provides a platform financial professionals can use to coordinate consistent communication between borrowers using their preferred method – whether that’s by computer, phone or in person. For example, 74 percent of borrowers prefer to access the lender’s website for more detailed tasks, yet most borrowers prefer to speak with a customer service representative for payment questions according to the American Bankers Association (ABA). Preferences will always vary from customer to customer, but providing a unique experience catered to the customer’s preferences is only achievable with a CRM and leaves a lasting impression.

To the general user, a CRM’s value lies in its ability to save time for the lender and decrease management responsibilities. However, for the true CRM user, the CRM’s greatest strength is its ability to collect and compile borrower information in a single platform. Financial professionals can utilize the data to gain a holistic understanding of the borrower’s circumstances, preferences and must-haves. It’s important for lenders to create a distinct experience for each individual borrower to cultivate deep relationships and inevitably create a diverse portfolio.

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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.

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