Many banks in these challenging times think they can’t afford an investment in business loan automation. Profits are limited, and competition is high.

The truth: You can’t afford to NOT invest in business loan automation, not if you want to stay competitive, run your operation as efficiently as possible, and serve your customers well.

This guide makes the case for why lenders, including banks and credit unions, MUST invest in business loan automation.

What is Business Loan Automation?

Business loan processing automation streamlines all aspects of the commercial lending process, including:

  • Applying
  • Assessing risk
  • Securing credit reporting information
  • Improving the approval process
  • Helping to ensure loan money gets repaid.

Automated commercial loan processing software relies on several types of digital lending technology to power the processes they handle throughout the loan lifecycle, including:

  • Artificial intelligence (AI) can be programmed to make loan decisions consistently based on your financial institution’s rules, aligned with regulations. It is also used to answer prospective loan customer questions and help guide them through the application process, making it more likely suitable borrowers won’t abandon. It can even use machine learning to help improve loan decisions and organizational processes over time.
  • Robotic process automation (RPA) helps eliminate most or all of the manual parts of the loan process and moves things forward more quickly and easily, speeding up loan decisions.
  • Optical character recognition (OCR) scans and reads submitted documents like tax forms and bank statements so they can quickly be used in evaluations.

In short, business loan processing systems use advanced technology to eliminate time-consuming and error-prone manual processes.

Why do banks need Business Loan Automation?

Business loan automation software improves activities in the following areas:

  • Loan application processing: Business loan software makes capturing information and processing digital and paper loan applications faster (in many cases 20 times quicker) with the help of RPA, ML, and intelligent image analysis tech.
  • Loan underwriting: Borrower risk assessments can take place in minutes rather than days with the use of technology. Plus, you can expect 100 percent accurate loan approvals because the technology is built with AI-powered risk management analytics, fraud detection capabilities, and consistent, non-biased loan decisioning.
  • Loan agreement management: Automated loan agreement management can help get loans issued up to four times faster. Artificial intelligence, when used properly, can make suggestions on optimal loan pricing to maximize bottom-line profitability.
  • Loan repayment control: The best business loan automation systems provide full visibility of open and paid loans. It also offers automated debt collection. This makes business loan servicing teams much more efficient and effective because they don’t have to chase down unpaid loans. Instead, they can focus on providing top-notch services to your best small business owner clients.
  • Borrower interaction: Most systems can handle more than half of all borrower inquiries and communications across most channels, especially online chat. Imagine the impact on your bottom line if you can serve more loan clients better with fewer customer service representatives.
  • Regulatory compliance: Business loan processing software can help ensure one hundred percent compliance with bank rules and industry regulations. Plus, you’ll enjoy faster regulatory reporting (up to 90 percent) because of automated compliance checks.

Ask yourself: Can your business loan company remain competitive without the benefits that come from using business loan processing software? The answer is likely NO.

How does automating make processes more efficient?

This checklist explains some key ways automation makes offering, processing, and servicing business loans more effective and efficient.

Better borrower onboarding and loan-origination process

  • Simple development of customer registration forms.
  • Easy-to-set borrower eligibility requirements, including minimum monthly income, geographical location, credit history, and more, based on your firm’s lending policies.
  • Automated extraction and validation of data from documents provided by borrowers.
  • AI-powered borrower pre-qualification-based data collected from accessible public sources, for example, credit rating platforms.
  • Automated borrower categorization, for example, borrower type, requested loan type, region, etc.

Automated task management

  • Automated assignment of loan processing tasks typically handled by loan officers, risk analysts, and other staff members based on employee availability, loan application value, region, and other factors.
  • Automatically handles scheduled and one-off communication with borrowers.

Solid credit risk assessment

  • Automated processing of borrower-supplied credit documents in formats including PDF, digital image, JSON, XML, and others.
  • Improved assessment of a borrower’s credit risk using weighted credit scoring based on criteria set by the financial services company, including loan amount, monthly income, income sustainability, and other factors, making better credit decisions possible.
  • Enhanced scoring of business credit risk using default probability based on modeling.
  • Automated calculation of prospective-borrower credit ratings.
  • Identifying loan applications that require additional information about borrowers. 

Faster and better loan underwriting process

  • Ability to create loan application forms based on templates that contain all the information and documents needed to evaluate creditworthiness and improve decision-making.
  • Automated loan approval workflow across multiple departments.
  • Customizable approval flows based on factors like loan type, loan amount, borrower location, and more.
  • Automated loan approvals or rejections based on rules set by the loan provider.
  • AI-based suggestions on optimal loan terms to propose to borrowers.
  • More quickly communicate loan decisions to borrowers via email, app, or customer portal.
  • Instant automated fund transfers.

Easier loan agreement management

  • Simple loan agreement development based on templates.
  • Easy to calculate the principal and API for each loan agreement.
  • Simple to automatically add loan agreements and other information to the correct borrower record.
  • Ability for loan officers and borrowers to track the status of a loan agreement, including when different parties sign it.

Automation of the loan repayment process

  • Automatically generate invoices and send them to borrowers.
  • Simple to track loan money and repayment status.
  • Easy to use loan repayment calendars.
  • Instant payment processing functionality.

Ability to handle different loan repayment methods, including bank transfers, cards, checks, and more.

  • Create and distribute scheduled and ad hoc debt collection notifications in different media.
  • Facilitate setting rules related to rescheduling payments and extending loan terms.
  • Alert loan officers about overdue loan repayments.
  • Automatically impose penalties on borrowers who miss payments.
  • Automated reconciliation of loan payments.

Better borrower data management

  • Centralized storage of all customer data.
  • Secure borrower document transfer and storage.
  • Search engine capabilities that make finding data easy. 

Enhanced real-time analytics and reporting

  • Simple to calculate critical metrics such as average loan cycle time, average loan value, approval rate, profit per loan, and more.
  • Automated reports on things like borrower risk scores, debt collection progress, loan portfolio performance, risks, revenue, taxes, and more.
  • Able to schedule the submission of loan reports in compliant formats to regulators.
  • Trend reporting based on historical data.

Taken together, all these benefits of business loan automation can pay off in a big way to the bottom lines of banks that employ it.

Takeaways: What are banks not using automation missing out on?

This guide explains all the key features and benefits of loan automation for banks. They make a powerful case for an investment in fintech.

More and more banks are getting on board with it.

Ask yourself: Can you afford to NOT invest in business loan automation software?

It’s unlikely that you can stay competitive with loan providers employing automated processes. And, because you’re not running your business as efficiently as they are, you will fall further behind. Also, over time, prospective borrowers will know that they aren’t getting as good a customer experience from you as from other firms.

In these challenging times for the banking industry, more firms are finding that investing in business loan automation software only makes sense. It’s the one way to improve the bottom lines of their balance sheets and ensure the future, long-term success of their operations.