Businesses have once again begun to thrive after restrictions due to lockdown have been lifted. Banks, credit unions and other lending institutes are focusing on their loan portfolios to offer more financing options to small businesses. Governments are also supporting banks and credit unions so that they can offer low-interest loans to businesses. As a result, businesses can produce new job opportunities lost due to the covid-19 crisis. However, banks and credit unions still face some change challenges when it comes to small business lending. Different products have different approval conditions and processes. A loan application goes through a long process before it is rejected or approved. The following three are the major challenges a lender has to address:
- Document collection
- Cumbersome data entry
- Borrower experience
Let’s see these challenges in detail.
Every step in loan origination requires some documentation. The lender collects documents from the borrower and verifies these documents to make the final decision. If a lender is following the traditional process of loan origination, the borrower has to mail these documents or deliver these documents in person. Both options are not convenient for the borrower. The borrower has to cover the cost of sending mails or traveling. What if the borrower forgot to submit one or two important documents? There is more cost to incur. Moreover, when the lender finds some mistakes or irregularities in some documents, the borrower has to correct those mistakes and resubmit documents. The entire process becomes costly for the borrower. Loan origination software can make the process convenient for both the borrower and the lender. The lender can request the required documents and the borrower can securely submit these documents online. The bank or any other lender can process, manage and verify documents using the same loan origination software. Most importantly, it also contributes to the timely completion of the loan origination process.
Cumbersome Data Entry
After collecting the required documents, the bank enters the data into the system it uses for analysis and spreading. Data entry can be a complex and slow process when it comes to small business lending. It takes time to enter the data manually. The probability of errors is also high while entering data by hand. In addition to delaying the process, errors can also lead to rejection of good application or approval of risky loans.
Customers of community banks, credit unions and small lenders often face this issue. These lending institutes attempt to attract small businesses. However, the borrowing experience they offer is not pleasing enough. The long and slow lending process can cause frustration. Borrowers have problems with speed, ease and transparency. The only solution to these problems is technology. A loan origination system automates the loan origination process. Borrowers can complete and submit loan applications from the comfort of their homes and the application goes through the automated loan origination process. This saves time and other resources.
A lender can address all these issues using loan origination software. It is good to have cloud-based software that can be accessed anytime and from anywhere.