Ways Small Business Lenders Can Help Speed Up the Underwriting Process

4 Ways Small Business Lenders Can Help Speed Up the Underwriting Process

When it comes to getting small business loans, borrowers usually choose speed and convenience over price. That’s why it’s vital for lenders to be quick on the draw when approving a business loan. They need to develop and streamline their application process to provide easy and fast funding to their potential borrowers

Are you a bank, credit union, or non-banking financial institution that deals with small businesses?

Are your lending operations approving loans at warp speed, without compromising credit quality?

If not then this article is for you. Keep reading while we’re sharing some new and innovative ways that you can utilize to streamline your underwriting process and easily evaluate whether or not an applicant is eligible for a loan.

Attract the Right Prospects

Attracting the right prospects is the first and foremost strategy to process loan applications and approve loans faster. No matter what type of loan products you offer, it’s vital to attract the right customers to keep your financial institution as profitable as possible. Having the right prospect can help you save a lot of time and effort, and speed up your underwriting process as you don’t have to review and analyze a lot of applications.

But who is the right customer? A right customer is someone who has been searching for the type of loan you offer. In the current lending environment, where customers demands are very diverse, it often gets difficult to find the right solution out of all the available options. Defining customer personas, studying customer behavior, segmenting customers, using automated tools, and setting the right expectations are some of the many important steps you can take towards the same.

Gather the Accurate Information

borrower’s accurate financial information is essential to speeding up the underwriting process. By gathering relevant and accurate information, you’ll save lots of time on reviewing various applications. For example, if the borrower has a history of foreclosure or bankruptcy, it’s vital to gather the right documents and review the dates prior to the loan file submission.

Accurate information can help you prepare and make it easier to see the entire picture when offering a good loan product to your borrowers. If you fail to get the accurate documents upfront, it can delay the whole underwriting process. You need to ask your borrowers to submit their documents again, and the loan will be on hold as you have to wait for their response.

Leverage Automation

Many banks and lenders still use manual and paper-based underwriting methods that seem outdated in a digitized world. Process automation is a great way for lenders to improve old-school business models. Lenders need to automate the underwriting process completely to provide easy and fast funding to potential clients.

To achieve that, they need to automate data capture and data collection events, digitize the document generation process, enable real-time integration and digital verification processes, and automated workflow models. From the storage, retrieval, credit decision, and review perspective, automated methods have several benefits Moreover, this new and innovative underwriting practice improve consistency, relevance, and accuracy.

Leverage Data and Technology

The perfect combination of data and technology can also allow lenders to streamline the disparate system, provide reliable, accurate, and real-time data to speed up the underwriting process. Today, some fintech firms use advanced analytics, predictive modeling, and AI and ML-based systems to collect, standardize, normalize and transport the robust suites of real-time data through an API to lenders’ loan origination platform. Lenders can use this accurate, relevant, and easy-to-understand data to know their customers better and streamline the underwriting process.

After determining the customers’ most valuable financial information, spreading the running the ratio analysis, performing projected scenarios, and undertaking a risk rating, most lenders have a good idea of what their lending appetite looks like. By reviewing and analyzing these new data points, financial institutions can make better-informed lending decisions and reduce the chances of borrower default. Ultimately, automatic credit decisions help improve the loan underwriting process for clients, and lenders.

By incorporating these four steps, banks and lenders can streamline and speed up the underwriting process. Start with small changes and utilize as needed. The underwriting process for a business loan is extremely important to gain a competitive advantage, position yourself as an industry leader and become a financial expert of the future. Lenders who are organized in getting their business loans ready for the underwriting process will close more loans in the future.

Image credit: Pymnts

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