The Key to Efficient Commercial Loan Origination

Lending has always been the key source of income for banks. Apart from their revenues from non-interest income such as ATM charges and overdraft fees, it has always been loan interest that has fed into the growth and revenue of banks.

However, with the arrival of fintech and fintech lenders, traditional banks face a scenario that was certainly not unexpected. Suddenly, the new entrants in this competitive landscape started churning out quick commercial loans, at lower interest rates, with lesser turnaround time and with a component of transparency that lenders are not known for.

What is causing this major shift and how banks, traditional lenders, and new entrants in the market ensure they are as efficient as the fintech leaders in the space? We discuss it all in this article where we share with you the key to efficient commercial loan origination.

It’s time to redesign the loan origination workflow

Without redesigning the loan origination workflow, banks and traditional lenders are looking at erratic inefficiencies, rising costs of loan origination, and a continuous battle to maintain their standing in the lending market.

What is loan origination?

Loan origination typically involves all the steps right from the loan applicant filling out the loan application, submitting the documents, screening of documents, negotiation, finalization of the loan application, and finally, loan approval.

Loan origination is a critical part of the lending process and a complex one due to the many steps involved. Streamlining the loan origination workflow is key to the long term success and growth of any lending business.

Throughout the loan origination process, different resources from various business units collaborate to carry out specific tasks on a selective basis. Given the pandemic situation, this step saw some further changes with executives working from remote locations throwing in a new variable into the entire process.

This kind of operational complication makes it crucial for lenders to come up with a solution that can support the system and make the loan origination process much smoother, efficient and most importantly, seamless.

A loan origination solution can streamline:

• Screening and verification
• Tracking credit scores
• Recording exceptions
• Loan approvals
• Risk mitigation
• Monitoring deals and agreements

This can help in doing away with duplication, errors, time-wasted in access and approvals, and allow lenders to complete loan origination in merely in matter of days instead of months.

Automated yet flexible workflows

Automated systems are not flexible. On the other hand, while manual processes are flexible, they are also prone to errors and inefficiencies. As such, whether lenders choose automation or manual processes, they lose out on either flexibility or efficiency.

The ideal digital loan origination system is one that allows for both. While the automated part of it churns data quickly through its algorithms, presenting close to error-free results in a record time, it also allows making certain changes and exceptions from a case-to-case basis as might be necessary. In short, the perfect combination of judgement or mathematical logic and rule-based efficiency.

These kinds of loan origination solutions help ameliorate alignment and interaction among the executives working with the various departments under loan origination and limit excessive workload for customer relationship managers, analysts, and loan approvers.

Cloud-based loan origination systems come with step-by-step checklists, templates, and guidelines to help users bring in the much-required consistency to the loan origination process. It also helps to keep all the stakeholders on the same page as to the status of each loan application.

Features such as pre-population of data, segmentation of users, and creating bespoke task workflow that suits each segment can help provide a better service experience to customers based on their particular profile, without expending further resources.

The importance of flexibility in loan origination

The cookie-cutter approach is seldom of use in the complex commercial loan origination process. For example, in the negotiation step, the outcome is often unclear. In such cases, it is impossible to layout an execution plan, complete with checklists where the outcome is not known.

It could be something expected or something completely out of the book. Therefore, even if a loan origination solution is in place, it should ideally be built using a flowchart approach allowing multiple probabilities and the possibility of incorporating a completely new scenario.

The set path followed by an automated system should not act as a spanner in the wheel when new information or situation tends to change the dynamics of the loan origination process. The best digital loan origination system allows stakeholders the option to take informed decisions and perform tasks in more than one way.

The critical component of transparency in loan origination

The commercial loan origination process witnesses higher stakes, longer negotiations, and the need for statutory and regulatory compliance. As such, it is crucial to demonstrate a high level of data integrity and transparency in the loan origination workflow.

To ensure this, it is key that process and data are separated in the loan origination workflow. This is important to make sure that either can be carried out without compromising the integrity of the other.

Loan origination solutions allow lenders to capture a bird’s eye view of all the deals that are still in process (WIP) and also spot outliers and bottlenecks. This helps them to monitor the flow of each deal and its approval, all the time ensuring complete data integrity.

The right kind of loan origination workflow collects data at all critical points and allows lenders a real-time view of the deal and information. Lenders can thus use the collected data and insights to make informed decisions and get a direct view of how changes made in the workflow impact the key metrics of the loan origination process.

The role of collaboration and communication loan origination

Loan origination solutions help bring remote teams and various stakeholders from different departments at one place. By offering a dashboard view of deals, workflows, and data, and providing task creation tools, loan origination systems allow stakeholders to view and manage interdependencies among tasks, their delegation, and management of the same. By leveraging the lender’s or the bank’s internal credit policy, the solution can help generate tasks in the workflow that can assist in structuring deals and monitoring covenants collaboratively.

With seamless communication, teams working remotely can manage their SLAs with ease while offering better visibility to the stakeholders. One KPI of how well the collaboration is working with a loan origination solution in place could be to measure if the product delivery schedules are being met when fewer resources are assigned to a particular project.


Lenders are increasingly becoming aware of the need to adopt a strategic manner of redesigning their loan origination workflow to battle increasing competition, rising costs, and high turnaround times by putting a loan origination system in place that allows both consistency and flexibility. By adding efficiency to their existing process, commercial lenders will be able to service higher volumes while providing customers with better interest rates and improved service experience.

  • February 25, 2021