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Commercial Lending Automation: How to Automate the Lending Process for B2B Clients?

Published by
Sriranjani Aravindan
August 8, 2023

According to McKinsey & Company, over 70% of B2B clients have expressed a growing preference for lenders that offer automated and seamless lending experiences, thus, businesses across the globe are increasingly turning to commercial lending automation to streamline processes and enhance efficiency.


In this blog, we will guide you through the world of commercial lending automation, empowering you to capitalize on its benefits and implement cutting-edge solutions for your B2B clients. Whether you are a financial executive, a loan officer, or a business owner seeking to optimize lending operations, this blog will equip you with invaluable insights to navigate the realm of commercial lending automation effectively.

Table of Contents

  • What is Commercial Lending?
  • How Does Commercial Lending Typically Work?
  • Key Aspects of Automation in Commercial Lending
  • Loan Origination Tasks that Can be Automated
  • How to Automate the Lending Process for B2B Clients?
  • Issues in Commercial Lending and the Promise of Automation
  • RPA Use Cases In Commercial Loan Operations

What is Commercial Lending?

Commercial loans are vital financial tools that enable business growth and stability, offering funding for expansion, equipment purchases, and managing cash flow. They bridge the gap between financial needs and available resources, empowering companies to thrive in competitive markets. While large enterprises have direct access to bond and equity markets for raising capital, small and medium-sized businesses face obstacles due to high costs and strict regulations. Commercial loans offer a feasible and accessible solution, supporting their ambitions and innovative ventures.


These loans prove invaluable for start-ups needing funds for research, development, and marketing. Additionally, they provide working capital to manage day-to-day expenses, payroll, and inventory purchases. Various commercial loan products are available from traditional banks, credit unions, and online lenders, tailored to meet specific business needs. Terms and conditions depend on factors like creditworthiness, collateral, loan amount, and repayment period.





How Does Commercial Lending Typically Work?

Commercial loans are commonly provided to various businesses to address short-term funding needs for operational costs or equipment purchases. Sometimes, these loans may also cover basic operational necessities, such as payroll or supplies for production. To secure such loans, businesses typically offer collateral in the form of property, equipment, or future accounts receivable, which the bank can claim in case of default. Commercial real estate mortgages are one example of commercial loans.


The approval of a commercial loan depends significantly on the applicant's creditworthiness, and lenders often require documentation, like balance sheets, to demonstrate a favorable and consistent cash flow. Interest rates on commercial loans are usually tied to the prevailing prime lending rate at the time of issuance. Throughout the loan term, banks typically request monthly financial statements and may mandate insurance on significant items purchased using the loan funds. By adhering to these processes and requirements, businesses can secure the necessary funding and ensure timely repayment.

Key Aspects of Automation in Commercial Lending

1. Loan Application and Origination: Automation simplifies and speeds up the loan application process, allowing borrowers to submit their applications online with ease. Advanced software can validate data, perform credit checks, and evaluate eligibility criteria, ensuring that only qualified applicants move forward in the process.


2. Underwriting and Risk Assessment: Automating underwriting processes using algorithms and AI enables lenders to assess creditworthiness more accurately and efficiently. By analyzing vast amounts of data from various sources, including financial records and market trends, the system can make data-driven decisions and determine appropriate loan terms and interest rates.


3. Document Management: Automating document collection, organization, and verification minimizes human errors and reduces the time spent on manual paperwork. Digital document management systems can securely store and track borrower information, making it easily accessible for lenders and auditors.


4. Decision-Making and Approval: Automated systems can evaluate loan applications against predefined criteria and risk parameters, allowing for faster and more consistent decision-making. This expedites the approval process, providing borrowers with quicker access to funds.


5. Loan Servicing and Monitoring: Automation can help with loan servicing tasks such as payment processing, account management, and monitoring borrower performance. By analyzing data on an ongoing basis, lenders can identify potential risks and proactively manage borrower relationships.


6. Compliance and Reporting: Automating compliance checks ensures that lending practices align with regulatory requirements. The system can generate comprehensive reports and audit trails, simplifying compliance reporting and reducing the risk of penalties.

Loan Origination Tasks that Can be Automated

Loan origination, the process between loan application submission and fund disbursement or loan rejection, has undergone significant automation for both consumer and commercial lenders. In the past, this task was handled by a team of originators, but now intelligent algorithms have taken over. The following steps outline the loan origination automation process:


1. Configurable Online Application: Borrowers can conveniently fill out loan application forms tailored to specific loan products and be compliant with local and international regulations. The system should be easily adjustable for lenders and user-friendly for borrowers, accessible through their preferred browsers and devices.


2. Bank Account Verification: Borrowers can swiftly and effortlessly add and verify their bank account details in the loan application. Modern lenders utilize bank statement data to improve credit scoring accuracy, streamlining the verification process.


3. Automated Application Processing: While human involvement in loan approval is necessary, the application processing should be highly automated. A proprietary advanced scorecard, integrated into the system, provides an intuitive back-office interface for customization. This enables loan managers to make informed decisions based on automatic borrower evaluations.


4. Email Communication: Although clients can reach out to real persons if needed, automating communication is more efficient. A customizable email template editor sends personalized emails to potential customers triggered by specific events.


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How to Automate the Lending Process for B2B Clients?

1. Configurable Online Application: Implement an online application platform that allows B2B clients to fill out loan forms and submit their applications digitally. The system should be customizable to cater to different loan products and comply with local and international regulations.


2. Advanced Underwriting and Risk Scoring: Develop a proprietary credit scoring model and incorporate advanced algorithms to assess creditworthiness accurately. Enable lenders to add their own scoring criteria while ensuring that the system has built-in scoring capabilities.


3. Automated Decisioning: Set up a decision-making process that provides insights and analytics to loan officers, facilitating informed credit decisions. Consider implementing taking automated decisions for certain loan applications based on predefined criteria to close deals faster in equipment finance and other commercial lending sectors.


4. Digital Document Management: Automate document collection, organization, and verification to reduce manual paperwork. Utilize digital document management systems for secure storage and easy accessibility.


5. Communication Automation: Employ automated email templates and alerts to communicate with B2B clients at various stages of the lending process. Offer options for real-time interactions with loan officers when necessary.


6. Loan Servicing Automation: Automate loan servicing tasks, including payment processing, account management, and customer service queries. Utilize interaction tracking to monitor borrower behavior and payment history.


7. Collateral Management Automation: Implement a flexible system for managing collateral types, valuations, and revaluations to efficiently handle assets submitted by B2B clients.


8. Automatic Loan Reporting: Generate comprehensive reports on portfolio performance, risk ratings, and collection ratings to keep lenders informed about borrower performance and loan status.


9. Regulatory Compliance: Integrate the lending software with compliance solutions to ensure adherence to changing regulations and streamline data collection for reporting purposes.


10. Data Imports/Exports and Integrations: Enable seamless data imports and exports from various sources to improve data accuracy and integration with other relevant systems.


11. User-friendly Interfaces: Design an intuitive and user-friendly interface for both lenders and B2B clients, making the lending process efficient and convenient.


12. Employee Tracking: Implement tools for monitoring employee performance and efficiency in the lending process, enabling better resource management.

Issues in Commercial Lending and the Promise of Automation

The process of issuing commercial loans can be manual, time-consuming, and highly competitive due to the abundance of capital in the market. Loan terms may often be influenced more by the number of competing lenders than the borrower's risk factors, leading to distorted loan pricing. These challenges create stress and frustration for lenders and borrowers alike, as the process relies on antiquated and inefficient systems.


Issues arise from a lack of digitalization in the lending process, hindering relationship-based aspects of lender-client interactions. The commercial loan approval process becomes cluttered with repetitive requests for information, weakening lender-client relationships and adding to the overall bloated process.


Despite these challenges, technology offers solutions to revolutionize the commercial lending landscape and spur growth. Advanced digitalization can streamline various aspects, such as underwriting, collecting documents, verifying documents, confirming delivery of equipment etc., through automation and improved visibility.


The adoption of technology is not limited to consumer-focused solutions; digitally-savvy companies are investing in automation to enhance their lending operations. The largest working-age group today, millennials, prefer digital solutions over traditional financial interactions, making it imperative for lenders to adapt and attract this generation as customers.


By automating tasks in commercial lending processes, lenders can focus on becoming trusted advisors to borrowers, providing value-added services beyond typical loan transactions. Operations teams benefit from automation and transparency, allowing for cleaner and auditable work, enabling them to identify new client opportunities and increase their value.


Embracing technology and automation not only improves the efficiency of commercial lending processes but also empowers lenders to elevate their relationships with borrowers and offer enhanced services, ultimately leading to greater success and growth in the lending industry.

RPA Use Cases In Commercial Loan Operations

1. Manual Data Entry

In the initial loan booking process, lenders manually create booking sheets in the servicing system based on the credit agreement. For syndicated transactions, participants receive notices and manually input data points into the system. Robotic Process Automation (RPA) tools are employed to automatically extract key loan terms from notices and legal documents, populating the booking systems.


2. Email Overload

Operations teams face a high volume of daily emails from various parties, leading to email overload. Although distribution lists are helpful, they do not fully resolve the issue, and maintaining an audit trail in multi-thread email conversations is challenging. To address this, incoming emails are directed and acted upon through workflow routing, automatically processing keywords and attachments. Workflow processes are triggered for amendments and loan modifications to prevent important items from getting lost in email chains.


3. Limited Borrower Self-Service Capability

Operations handle routine customer and internal inquiries about the loan. Asset-based lenders receive borrowing bases via email, requiring manual extraction and analysis of data. Borrower portals provide self-service options for customers to check loan terms, and chatbots are available to answer basic questions without operational involvement. For asset-based borrowers, automated data extraction allows for daily uploading of borrowing bases.


4. Static Reporting

Operations teams have created static reports that offer basic portfolio stratifications based on geography, industry, and risk rating. However, more sophisticated value-added analytics are conducted offline. Implementing data analytics tools like Qlik or Tableau enables uncovering business insights, such as customer profitability and cross-sell opportunities.


In conclusion, you've gained a comprehensive understanding of commercial lending automation and how it empowers your B2B lending processes. Embracing automation will undoubtedly revolutionize the way you cater to your clients and streamline operations for optimal efficiency.


Incorporating automation into your lending process is the key to unlocking untapped potential and staying ahead of the competition. Embrace cutting-edge technologies, like AI-powered underwriting and digital document management, and communication platforms like App0 to expedite loan approvals and reduce manual errors. Emphasize personalized customer experiences with automated communication, ensuring your B2B clients feel valued and well-attended throughout their lending journey. 

How App0, an AI-Powered Text Messaging Platform Can Automate Commercial Lending Process?

App0, a specialized customer engagement platform tailored for the financial services sector, offers an innovative AI-powered text messaging solution to banks, credit unions, and fintech. Our platform enables these organizations to create exceptional customer experiences using conversational interfaces and intuitive design while prioritizing security and compliance. Sign up with App0 now to seamlessly integrate various communication channels and centrally manage user preferences to automate the entire communication with your clients during the commercial loan process.


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