Commercial Loan Approval Management: Two Approaches

Most banks understand the importance of digitizing their backlogs of existing commercial loan files. In fact, according to our study of 103 community banks, 69% of those community banks surveyed are already using imaging software to organize loan files.

But, what about new customers and applications? Does scanning earlier in the approval process offer added efficiency? If so, what’s the best practice for tracking applications from prospective customers? Is electronic approval feasible?

These are all good questions.

So good, in fact, that a sizable portion of our banker’s forum at Accu-Summit 2017 was dedicated to this very discussion.

In this post, we’ll share two prevailing perspectives from Accu-Summit on the topic of commercial loan approval management. (Spoiler: Both involve the utilization of a bank document management system, such as AccuAccount.)

Option 1: The DIY Approach in AccuAccount

“Our management team said they didn’t want paper documents sitting around on employees’ desks. We therefore needed a way to digitize the loan approval process. We were already using AccuAccount, so we made a customization that allowed us to start building the ’customer’ record while they’re a prospect,” said a Credit Administrator from an $825 million bank.

In other words, the bank essentially uses AccuAccount as an application tracking system and basic CRM. To make this happen, the financial institution’s IT team added custom statuses that include: “prospect,” “pending,” “active,” “denied,” and “withdrawn.” As new customers progress through the application process and pending loans are booked to the core, AccuAccount automatically updates the customer record from pending to active.

The banker pointed out that this approach does require a noticeable level of administrative oversight. “If the loan support person notices that a customer name doesn’t exist in our core, there’s a form that our admin fills out. It goes to our producer, who puts the name in our core (the way they want it) and to our specialist who builds the customer in AccuAccount. Then, it’s usually an hour or two later, and the team is done with their work. Everything is built, and an email is sent back to the original requester.”

The financial institution follows the same sequence of events for new loan records. The front line is asked to provide basic details, such as the loan number and collateral information. This helps keep the data nice and tidy before documents are scanned into AccuAccount.

“We’re very particular in how the customer and account details go into our systems, which is why this approach has worked really well for us.”

Option 2: The AccuApproval Approach

Another banker, from a multi-billion dollar financial institution, then shared his approach for managing the loan application and approval process.

“Our bank utilizes AccuApproval, which was built specifically for this exact use case. With AccuApproval, we scan everything in before the loan is even booked. You don’t have to send emails back and forth – it does it all for you. It even takes a snapshot of your application history, so it will tell you who created the application and all application information, who sent it to doc prep, etc.”

Loan Approval Module Customer Page

AccuApproval is an add-on module for AccuAccount. AccuApproval was designed to streamline the loan approval workflow. It’s completely customizable, allowing banks to define a process that mirrors the traditional paper-based routing and approval process. AccuApproval can connect to document preparation systems, making it easier to get information into electronic format. With timers and approvals, banks are able to make better lending decisions with less administrative effort.

The banker summed his thoughts up nicely when he said, “AccuApproval takes the thinking out of the approval equation.”

Moments later, another AccuApproval user (from a 24-branch bank on the East Coast) shared her perspective:

“I agree – AccuApproval has made our process a lot easier.”

This process enhancement has not come, however, without some tradeoffs: “The more paperless you go, you’ll have to give up more control. We have a lot of trust in our lenders and admin team, as they understand the document and know their customers.”

Clearly, de-centralization is an important step to reaping the greatest value from an approval module like AccuApproval.

A Closing Thought

If your bank is thinking about going to a digital loan approval model, heed this final bit of advice from a successful AccuApproval user: “We made the transition in phases. We didn’t try to do the entire process at once. We started with our credit department and pushed it out to lenders, and other departments. This has helped everyone accept it.”

Change is good, when implemented correctly. As you look to the future toward an electronic loan approval workflow, be strategic in how you advocate for change.

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Connect with Jennifer Mitchell

Jenn Mitchell is AccuSystems' Sales Manager, overseeing sales and marketing operations. Jenn previously worked as a Loan Originator for several community and regional banks. Connect with Jenn >>