Not all loan underwriting software is created equal. Just as there are many different kinds of lending institutions, from large commercial banks to small credit unions, there are many software options for loan analysis and tracking to choose from.
Community banks and credit unions typically begin the loan underwriting software search as they’re growing. Performing spreading and loan analysis tasks in Excel had been working, but as they scale, these lending institutions want software that offers more. Automation, customizable templates and other features can save lenders countless hours of hands-on time, improve accuracy and transparency, and save loan officers and analysts the headaches Excel can bring.
In this post we’ll explore loan underwriting software solutions and what community banks and credit unions should look for when considering an upgrade from Excel.
Designed for Large Cap Commercial Lenders
It stands to reason that tools designed for the nation’s largest banks are not the right fit for community lenders. But understanding the tools these big players use does offer perspective on what tools and features are helpful to small business lenders.
Large cap commercial lenders that originate $10 billion to $100 billion in loans are large enough to employ a fleet of developers and engineers who can build and update proprietary software to manage the complex deals they handle each day. They are working with audited financial statements–not personal and business tax returns–and are spending much of their time reviewing balance sheets and conducting liquidity analysis, in some cases using advanced automation.
Custom designed solutions for community banks and credit unions are available, however they come with a high price tag and require a capable internal team, or managed service, to keep the system secure and running properly, adding to the already high price tag.
Out-of-the-Box Solutions for Mid-Market Banks
Middle market banks, which have portfolios ranging from $5 billion to $50 billion, often opt for out-of-the-box loan underwriting software, commonly served under the Software-as-a-Service (SaaS) model. These loan origination software (LOS) options offer a baseline end-to-end solution that banks can customize at deployment to meet their needs.
That customization, while a benefit to some banks, means getting software up and running takes expertise and patience. For example, some software platforms have institutions define what fields to track and the properties of fields. This can be time-consuming, leading to a 12 to 18 month implementation process. Once completed, the software is fairly rigid, leaving few options to note exceptions and adjustments. In addition, institutions often need in-house expertise to manage the software and troubleshoot issues.
Like the largest banks, these lenders are working with audited financial statements and documentation prepared by professionals using best practices. Because of the size of their portfolio, they may not offer small business lending at all. If they do, it’s likely automated by the LOS based on a small set of criteria. If the business fails to meet the mark on any required item, the loan is denied.
As we’ve noted in other articles, an LOS is not designed for small business lending but instead offers hyper-efficiency by blackboxing automated credit decisions.
A Loan Underwriting Software Solution for Community Banks and Credit Unions
Small business lenders are focused on building community and less on black and white criteria. Because of this, they need a solution that’s flexible, yet structured enough to create a more efficient and accurate process.
Many community banks and credit unions still use Excel for spreading and tracking tasks. Yet common issues with this method, from broken formulas to time-consuming data entry, cost lending institutions valuable time. When time is at a premium, you need a software that not only saves loan officers time, but can also be onboarded fast.
FISCAL Forward and TRACKING is ready to use on day one. Your analysts can start running spreads immediately with standard templates and reports built in. For institutions that want to marry their own practices with software capabilities, FISCAL also offers flexibility with customization options beyond deployment. Banks and credit unions can continually tailor templates, memos and reports in line with existing processes.
For example, if your bank would like to note the actual liquidation value of a personal retirement account in addition to actual value, a bank could customize an existing template to add that feature and save it for future use without worry that it will be overwritten.
Features Designed for Your Institution
The best way to assess whether FISCAL is the right loan underwriting software for your bank or credit union is to get a demo. Contact us today to set up a time to meet with our technical team.