4 Ways To Get Competitive In Commercial Lending Business

Importance of commercial loans to small businesses 

Commercial loans are an integral part of any Commercial Lending business and are more complex than personal loans. Often small business owners face situations where they cannot take decisive steps for capital budgeting requirements. Given a choice between holding on to their stake in a business they developed from scratch or inherited from a previous generation and borrowing the former is ideal. However, in reality, most are good at only core business and not adept with other key management areas of business. 

Business owners’ inability to value the worth of their enterprise poses hurdles for deciding between the optimum balance of selling equity and raising a commercial loan. Till recent times this area of commercial lending business was serviced by an unorganized sector of loan sharks. It is about time banks started recognizing under-serviced prospective businesses that offer quality loan portfolios on their balance sheets. 

prospective businesses

Role of automation in lending

Automation of loans has benefits that translate into increased profitability without disturbing other parameters negatively. The advantages of consumer lending software integrate the same benefits. 

 Few benefits to opting for automation of loan origination include:

  • Less turnaround time for a loan application to be processed
  • Improved experience for borrowers and employees
  • Complete verification of the data using integration tools
  • Higher standards of risk compliance 
  • Automatic disbursal of the loan after approval
  • Monitoring loans for any risky changes and stacking up covenants if necessary

After emphasizing the benefits, let us compare four ways commercial lending businesses can take advantage of automated consumer lending software here : 

  • Due diligence

Underwriting commercial loans are more critical. The person reviewing the applications should have a fair understanding of the business areas, the prospects of growth, and the ability of the business owner to generate revenue, understanding the liability limitations of the organization and their personal credit history. Unlike personal loans that assess a person’s income and previous credit history and score, a commercial loan has more points to check. 

But investing in commercial lending automation will minimize human effort and errors in all the end-to-end processes of loan origination, including underwriting. Automation tools offer better compliance and accuracy in detecting fraud. 

  • Agile and scalable

Unlike legacy enterprises, cloud-based loan origination tools are dextrous. They can accommodate changes and can be rolled out easily. Loan processes like underwriting that use AI and ML are critical functions; using tools that can update changes is significant for the efficiency of the process.  

A good LOS uses software that is scalable in the future. If the software is redundant within a few years, it creates a dominion of operational problems and loss in revenue for the business. But commercial loan origination software can incorporate changes quickly with less downtime to continue lending business without hurdles. 

  • Operational efficiency

Business loans need higher calibration owing to the nature of the risks they carry. But the reward of investing time and resources in business loans is high for any lender. Automation of loan software evaluates the borrower’s industry aspects, business strategy, the efficiency of handling cash flows, and granular analysis of covenants are functions seamlessly carried out without errors by the digital loan system. These tasks are critical for underwriting a loan and automation checks everything for accuracy and analyzes the data in record time for credit assessment. 

  • Growth of loan portfolio

Growth is important but so is quality in the lending business. Commercial borrowers offer repeat business as they need different types of commercial loans. Retaining commercial borrowers who do steady business and grow with the bank is an integral performance metric for loan managers. 

Commercial borrowers specifically small business owners value turnaround time and add fee-based professional advisory services of a bank. They appreciate quick disbursal of loans as it aids in their working capital management. With automated loans, business borrowers receive credit decisions faster. If the information provided is insufficient for any reason, the relevant data is requested at the time of application. This helps in saving time for both borrowers and banking resources. 

Features of an efficient loan origination software 

Loan origination software is designed on cloud-based software and coded for all the current parameters of the life cycle of the loan. A lender looking for a new LOS has to look for essential features stated here:

  1. Secure access for employees
  2. Ease of process for a borrower with semantics to help in filling forms
  3. Resilience to cyber threats
  4. Data protection
  5. Compliance with risk and regulatory metrics
  6. Scope to adapt and develop the application
  7. Cost-effective
  8. Easy to implement 

Many vendors have developed various LOS and automation tools. A bank, credit union, or fintech company has to check the details of a product that suits their business requirements. All or part of the functions, of loan originations, can be automated based on the need, and size of the business. 

Closing Note: The future of commercial lending

The steady growth of commercial lending and the presence of Fintech companies that are catering to the hitherto neglected small business lending needs advocate the need for LOS.

In recent years, commercial lending has grown at a healthy pace of nine percent. After considering the iterations stated earlier, commercial banks have taken proactive steps to bolster the commercial loan portfolio. It currently comprises 35-40% of the bank’s assets and promises to gain more traction. 

However, servicing this segment will burden the existing human resources of a bank. It can be overcome by buying licensed loan software that suits all the needs of commercial and other loan products. On the contrary, disregarding the need for one will lead to inconsistent loan application, slow processing, disinterested clients attracted by competition, and an inefficient loan origination process.   

Without the prowess of commercial loan origination software, aiming for a big slice of commercial lending market share is an unimaginable feat. Automation in lending, banks cannot ignore further and lenders who are yet to start using one. Rolling out one may have initial teething problems, but with training, the staff will get used to the system and help clients enjoy the benefits as well. 


Saeed Akhtar is a seasoned freelancer and digital marketer, boasting a rich background cultivated over five years in the industry. With a passion for innovative strategies and a keen understanding of the ever-evolving digital landscape. Saeed Akhtar brings a unique blend of creativity and expertise to his projects, consistently delivering results that exceed expectations.