Credit unions seem increasingly interested in growing their commercial loan portfolios, especially in light of recent and ongoing changes to business lending rules. Members, also, are poised to benefit from these changes, which open up new sources of funding for business owners and encourage increased competition in the market.
Despite the potential opportunities, some credit unions have been hesitant to embrace commercial lending. Let’s look at some of the challenges credit unions face and how technology might hold the key to confidently move forward.
Roadblocks To Commercial Lending At Credit Unions
Building a commercial loan portfolio requires the right mix of expertise, time, effort, and technology. Unfortunately, not every credit union is adequately equipped. Here are a few reasons why.
Expertise
For years, credit unions have primarily focused on serving the personal financial needs of their members. That’s led to a noticeable void in commercial lending expertise — and there’s a lot to know.
Compared with consumer loans, commercial loans can require far more paperwork, take longer to close, and involve more decision-makers. A real estate loan for a manufacturing company could be considerably different from an equipment loan for a trucking fleet, yet they’re both commercial loans.
Capacity
Hiring commercial lenders from community banks is one strategy for filling the expertise gap. However, each new commercial loan brings with it a considerable amount of administrative work. One commercial loan file could consist of hundreds of pages of documentation — from applications to promissory notes, credit presentations to tax returns. Some documents are only collected once, whereas customer financial statements and insurance documents are collected on an ongoing basis. Participated loans create even more downstream complexity.
To keep pace, some financial institutions staff up with a team of loan admins and lending assistants, which represents a tangible opportunity cost.
Technology
Without the right tools, even the most efficient back-office team will struggle to handle the sheer volume of documents, exceptions, and tasks associated with a growing commercial loan portfolio. Commercial LOS, eSign, document management, and workflow systems are practically essential to compete in today’s commercial lending environment. But, having the right tools represents another investment decision for the credit union.
Overcoming Commercial Lending Challenges With Scalable Technology
Implementing the right technology at the right time can soften the transition for credit unions looking to increase commercial lending. For example, a system like AccuAccount from Alogent offers features that can help establish a solid foundation for commercial lending:
Intuitive imaging: Instead of storing customer credit and loan documentation in paper folders, AccuAccount makes it easy to digitize and store everything in an intuitive environment. Better yet, credit unions can also use AccuAccount to organize existing documentation for members’ personal accounts and loans, providing a more comprehensive view of each relationship.
Built-in exception tracking and reporting: Tracking exceptions in a spreadsheet is tedious and inefficient. AccuAccount makes it easy to track document, policy, and other exceptions for members and their accounts. Automated reporting sends exception data to users’ inboxes on a regular basis. AccuAccount can also remind users of important tasks — such as taking action on expiring UCC financing statements — to prevent exceptions before they occur.
Automated workflows: Electronic routing of commercial loan files reduces the chance for misplaced and overlooked documents. It also creates a scalable workflow a credit union can repeat over and over again in accordance with its lending policy. Lenders, underwriters, and management will appreciate having immediate access to important information without waiting for interoffice mail to arrive.
Integration capabilities: Imaging, tracking, and automated workflows are vital components of efficient commercial lending; however, core systems, LOS, eSign, and other tools play an equally important role. AccuAccount interfaces with 30+ systems to help credit unions build highly integrated commercial lending ecosystems.
Learn how AccuAccount can help streamline imaging, tracking, and approval to help your credit union achieve its commercial lending goals. Download an overview document or contact Alogent for a personalized demo.
By Jason Schwabline, chief strategy officer at Alogent.