2019 has, so far, proven to be a strong year for commercial lending. Data cited in American Banker from The Federal Reserve notes the end of December 2018 saw commercial and industrial loan dollar amounts at large, domestically chartered banks increase 2.1 percent, from $26.5 billion to $1.27 trillion within a single week. With such growth, it comes as no surprise that bankers are ready to reengage this sector of their businesses. However, one must also ask is their technology as equally prepared? Unfortunately, the answer is no for many.
Is Your Technology Equipped for Commercial Lending?
Commercial and industrial lending's uptick stemmed in large part associated with an easing of lending standards among top U.S. and foreign financial institutions, particularly to those organizations with more than $50 million in annual revenues. This relative acceleration in the market has challenged many companies to quickly access funds to support growth which has extended to the bankers that serve them.
Just as bankers invested heavily in new technologies to reduce friction and improve the user experience in consumer and small business lending, the time has come to do the same for commercial lending. Like consumer borrowers, commercial borrowers are also interested in faster loan approvals, fewer to no duplicate requests for information and streamlined submission processes for ongoing documentation.
Unfortunately, many commercial lenders utilize legacy systems that prohibit this experience from coming into fruition. These systems consist of disparate collections of technology that does not communicate effectively and requires the manual input of data between systems. This process feeds into the borrower's dislike of slower approvals, duplicate requests and human error, not to mention the added time and cost to originate.
Why a Commercial Loan Management Solution is Vital
It’s essential for commercial lenders to effectively manage the process across the complete life cycle of a commercial loan and adopt a true integrated approach to commercial loan management (CLM). Proper execution yields numerous benefits, including reduced expenses (through the elimination of duplicate effort), improved compliance (resulting in lowered examination burden) and ultimately, stronger topline growth (through the more effective targeting of opportunities).
As bankers evaluate their technology infrastructure, key components for an integrated CLM system should include:
- Clear visibility into the loan approval process - both internally and externally;
- A seamless and consistent flow of information extending from origination throughout the life of the loan;
- Configurable levels of flexibility in loan functions for various users (depending on their role, experience level, skill set, etc.);
- The ability to collaborate without the fear of incomplete or outdated source information;
- Capability for regulatory compliance and other internal policies to be consistently enforced across the enterprise; and
- Removal of paper from the process wherever possible.
Because different financial institutions have unique credit policies and risk appetites (and lending strategies and policies tend to evolve over time), a CLM system should include configurable components driving the policy and rules engine as well.
For more information, check out the Commercial Lending Solution Brief below