Creating Collaboration in Commercial Lending

What would happen if you lost $250 million dollars because you have a single point of failure in your business process?

That is a question that none of us want to imagine happening in our careers, but it did happen just recently when a blockchain investment group lost over $250 million dollars because, apparently, their CEO and the only person who had the security keys/passwords, suddenly died and locked out the access to the funds indefinitely. Now, I totally understand that passwords are an exception (I am not advocating that you share your passwords), but what could this investment group have done to make sure they would have the ability to have access to their funds, rather than being locked out?

Now pivot this concept to your commercial lending process. What parts of your process have a single point of failure that will either slow down the lending process and make you lose that pending deal, place risk in the financial performance of the deal, or not even give insight into the potential opportunity?

In a recent Aite study, commercial lenders identified key challenges for generating higher productivity in the lending process.  Bankers currently identified the top issues as:

1. Gathering information on the credit commitments to existing borrowers and their related entities
2. Handling unnecessary edits and changes to credit proposals
3. Having redundancy provisions for data points, such as customer-identifying data

To make matters worse, in many banks the tasks related to these three challenges are performed by one person. So how do you eliminate these challenges? I am going to show you how collaboration can streamline, optimize, and enhance the lending process.

Collaborate With Your Core and Other Data Sources

First of all, you are sitting on a ton of data already within your core data source. If you are not using that data and leveraging it within your commercial origination system, you are adding at least two to three hours to your lending process. Banks lose invaluable opportunities to re-purpose rich data for meaningful activities that could ultimately increase revenues and greatly lower costs.

Additionally, the data on a typical commercial loan decision comes from many areas beyond your core—for example, customer relationship management (CRM), deposit and exposure systems, financial statement spreading systems, and scoring systems. The banks that are taking lending to the next step are leveraging this data to facilitate credit committee decisions, and then storing all of this conveniently in one system.

Collaborate With Your Credit Policy

As a commercial lender, I remember the time and effort quality took, and the variability in quality when it came to enforcing and verifying compliance with the credit policy. In today’s regulatory environment, it cannot be emphasized enough that you need to make sure you are aligned with compliance and in check. If your point of failure is a new or negligent loan officer who is not understanding policy, then you need to look at a way to collaborate and optimize those compliance checks. With Baker Hill NextGen®, we can verify and automate compliance checks so that the insights are consistent, and best of all, efficient.

Collaborate With Your Lending Team

The biggest lift that you will of course gain is with your most important assets—your team. The knowledge sharing, work collaboration, as-needed specialization, and the ability to leverage collaborative technology like Microsoft Office 365 Word when putting your credit memorandum together will be a great lift. Imagine working in real time with your financial analyst, a member of your asset-based lending team, or any other member of the lending team. Best of all, with a robust, collaborative approach to building out the credit memo, you have the ability to pull over the insights from the previous year’s credit memorandum.

So think how you can tear down walls and remove risk—and most importantly build great teamwork between your data, your policies, and your lending personnel!

Author Bio

With more than 25 years of experience in the financial services industry, Mike Horrocks possesses a unique and extensive blend of financial expertise, technology skills, process redesign abilities and solution management experience. Horrocks’ background enables him to create go-to-market strategies for new solutions, help clients convert strategies into revenue generating initiatives and forecast market direction.

As the Vice-President of Product Management at Baker Hill, Horrocks’ responsibilities include the identification and development of new market opportunities in the business of lending, risk management, and analytics for financial institutions. Mike holds a MBA both in International Finance and Venture Technology Management from Indiana University and a B.S in International Finance from Brigham Young University.

Before joining Baker Hill, he held executive positions within several other organizations, including Experian, Profit Technologies, SAIC, Broadway and Seymour (FIS), Zions First National Bank and Zions Data Corporation.

Horrocks is a member of many associations including the Risk Management Association and Bankers Without Borders. In his free time, he enjoys traveling internationally with his wife and five children.