Setting a Growth Strategy for Commercial Lending

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BLOG VIEW: As the economy improves, every sector of the real estate business is experiencing growth – or at least the opportunity for growth. The commercial lending industry is also enjoying this potential, though many companies are finding themselves challenged to capitalize on it.

The U.S. Department of Treasury expects commercial lending annual revenue to reach nearly $240 billion by 2019. This fantastic news for lenders offering financing for commercial projects, if they are in a position to take on the additional business. Too many are not.

Struggling to overcome the limitations of legacy systems and outdated processes is a major challenge for many at a time when they could be experiencing strong growth. With the commercial loan origination and closing lifecycle taking months, it can be very difficult for lenders to grow, even when the opportunity is there. Commercial mortgage lenders need to set their strategy for growth now.

The Challenges Commercial Lenders Face

Lenders offering financing for commercial projects don’t need to be told that managing a large staff of business development officers, analysts, credit committee members, loan administrators and outside closing agents creates a massive drag on the origination process. Even if one could shepherd the process through this maze quickly, the risk of human error is high and the cost of non-compliance are very high.

With so many partners contributing to the process, it can be very difficult to establish a centralized area for loan processing, to say nothing of life of loan management. Lenders are rushing into the lending process almost blind, with little support from older technologies and no actionable information upon which to assess their overall progress. To the question, “When will the loan origination process be done?” lenders can only answer “When we’re done.”

This doesn’t make sense in an age where the sophistication of technology platform integration has evolved to the point that we can now share data from systems of record safely, securely and efficiently. We have the technology, if lenders can find the time to put it into play. If their strategy calls for that work to be completed soon, then commercial lenders can grow their businesses. If they wait, they will be unable to properly engage the market and will lose qualified borrowers to the competition.

How to solve this challenge? The solution isn’t a simple matter of choosing this tool or that one. To really prepare themselves for the future, commercial lenders need to adopt a strategy that takes into account the following three pillars.

Configurable Workflows

Fixed workflows are temporary solutions. They do not allow the lender to keep pace with the changing requirements of their borrowers or regulators. The platforms commercial lenders use today must be capable of responding to the lender’s changing needs and the evolving regulatory environment. In a fast moving market, such as the one we are in today, anything less can take a lender out of the game.

That means that to be successful, lenders must have greater control over the operational component of the workflow. They must have the power to reshape that workflow as their needs change and the business evolves. There is no other path to success.

Robust Data Integrations

It’s all about the data – and the more efficiently a lender’s systems can put the right information in front of the right decision maker, the more effective and profitable the lender will be. With the right process, the lender will have speed, which is of critical importance.

That means the data has to move through the system automatically, without requiring human intervention. Data must move bi-directionally, making the information available for usage and augmentation without delaying the process. Automating manual processes delivers this speed and reduces processing times.

Actionable Management Insight and Reporting

Lending is about risk management and that’s not possible if the decision makers don’t have the information they need, when they need it. To find success, lenders must have the power to evaluate processes and results continuously.

Reporting should be easily accessible for one-off pulls and scheduled intervals and visible via desktops, tablets, or mobile devices. In short, the data needs to be accessible by the people who need it when they need it. Robust reporting provides a clear view into operations and enables real-time changes, which is the only way to mitigate risk and maximize profitability.

A Solution Within Reach

Platforms like the one described are available to commercial lenders today. These systems will allow lenders to expand and achieve profitable growth when the market presents the opportunity. That opportunity is available to lenders today.

Without a solid strategy for achieving growth – one that includes the three pillars described – lenders cannot achieve maximum profitability and will remain chained to inadequate process and solutions.

Lenders that embrace innovative technological solutions can eliminate the risk of human error and reap the benefits of faster communication and reporting – elements which are now critical to growing their businesses. Commercial lenders that succeed in doing this will outpace those that do not.

James Byrne is senior product manager for ARGO Data Resource Corp.

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