How To Accelerate Loan Processing And Closing

The use of debt and debt capital to meet a company’s financing requirements has been gaining prominence. Lower interest rates would increase demand for debt capital. US debt stood at USD23.29tn in xx and is expected to rise further, highlighting the importance of debt. Banks and financial institutions are constantly optimising their processes related to loan applications. There is, therefore, an urgent need to accelerate the decision-making process for lending operations and make it more efficient.

With new technologies being introduced and regulations evolving, financial institutions can accelerate loan processing and closing.

Preparing standard operating procedures (SOPs):

One of the main issues with lending operations, relating to the slow application process and slow closure, is the lack of proper SOPs. An SOP eliminates confusion at any stage of the process and provides clear instructions on how to deal with situations an employee may face when reviewing an application. The SOP should leave no room for interpretation, as this would slow the process. It should detail the process, from acceptance of the application to final approval, and all employees must be trained accordingly.

Automated financial spreading:

Different companies prepare financial statements in different formats, in line with the standards applicable to them or in line with the format that best suits their business. Although legal, this presents a challenge for financial institutions that may not have the facility to compare two companies easily and efficiently. Using automated financial spreading in lending operations would enable the conversion of all financial statements to a specific format. This would help banks and financial institutions gain meaningful insight on different applications and make quicker decisions.

Cash-flow models and projections:

An organisation’s ability to repay a loan and the debt facilities it has availed itself of are key to deciding whether to extend a loan facility. Organisations provide cash-flow projections along with their applications to convince a financial institution of their ability to repay. It is important that financial institutions study these projections and models before making a decision. They could also prepare their own cash-flow models and projections and compare these with the projections presented by the organisation. Companies such as Acuity Knowledge Partners, through leveraging technology and experts, help financial institutions make more informed decisions.

E-verification with defined criteria:

Converting a loan application or debt application process to an electronic module with predefined criteria for approval or rejection is important. Automating the system of basic screening would enable employees of lending institutions to concentrate on valid applications rather than wasting time on rejecting applications that do not meet the criteria. Automating the initial process may result in saving both cost and time, and increase the profitability of the lending operations.

Workflow management and automation:

Using a workflow management tool and automating tasks of the lending operation would enable faster processing and closing of loans. A workflow management tool would allow for proper monitoring of ongoing projects and processes and determining the stage they are at. These tools enable real-time reporting and allow for multiple users, ensuring faster response time, feedback and correction of any issues that may arise during the process.

Conclusion:

Leveraging technology would make a company’s lending operations more efficient. Automation and artificial intelligence are two tools a financial institution could rely on to increase efficiency and reduce costs. A number of service providers now help financial institutions move towards leveraging technology through their robust systems, such as Acuity Knowledge Partners’ proprietary workflow management tool, BEATFlow.