Customizable vs. Out-Of-The-Box Software: An Overview for Lenders

Are you an SME lender considering replacing your current loan management software, or maybe implementing a brand-new solution to streamline your SME lending operations? 

Before taking the plunge, it’s critical to consider your options. When it comes to loan management software, there’s a common but misplaced belief that fully customizable is always the way to go. 

Rather, the ideal solution for your alternative lending business depends on multiple factors, such as budget, timing, deal volume, industry niche, and so on. 

If you’re unsure of what would work best for your organization, this customizable vs. out-of-the-box software guide will help you make a decision.

What Is a Fully Customizable Lending Software?

A fully customizable lending software is tailored to meet the unique needs of your business.

For example, say you work with a specific type of merchant or lending product, and you need a solution that can help you implement a unique lending workflow.

In this case, a  customizable lending software would work best for you, as you can build it according to your goals, and change it as your business evolves.

As ideal as this may sound, there are both pros and cons to opting for a fully customizable lending software for your alternative lending business.

Advantages of Customizable Lending Software

Let’s start with the pros. A customizable lending solution can offer lenders several advantages, including:

1. Business Match: a bespoke development/implementation process means the software fits your business, and not the other way around. In other words, each aspect of your platform can be designed and modified to fit your organization’s requirements.
2. Long-Term Growth: because of its flexible design, a customizable lending solution can be easily adapted as your business evolves and grows. You don’t necessarily need to switch to a new platform as your needs change—rather, you or the solution developers can adjust the technology, building upon your current one.
3. Security: customizable software solutions provide lenders with a higher level of security. By leveraging a bespoke system, lenders can implement targeted security measures, robust authentication processes, and advanced encryption techniques that cater to their specific needs and regulatory requirements.

Disadvantages of Customizable Lending Software

Of course, nothing is perfect—consider potential drawbacks like:

1. High Upfront Costs: customizable software has higher upfront development costs than out-of-the-box software. Factors include the size of the project, UX/UI complexity, and any data migration needs. The more unique features you add, the more development time you will need, and the higher the price you’ll pay.
2. Long Development Lifecycle: going the customizable route can take much longer in each stage, from planning through development, and eventually deployment. Are you in a hurry to get to market? A customizable lending solution may not be the best choice for your organization.
3. Maintenance Costs:  in addition to high upfront costs, you can also expect to incur significant maintenance costs moving forward. These costs include software updates, technical support, security and compliance, infrastructure costs, and bug fixes. Ensuring your platform operates at optimal efficiency will require ongoing programming—often by a specialist. And these expenses can add up over time.

What Is an Out-of-the-Box Lending Software?

Out-of-the-box lending software refers to a pre-built, ready-to-use software solution that offers a standardized set of features and functionalities that cater to common lending practices, including loan origination, underwriting, loan servicing, risk assessment, compliance management, and reporting.

Out-of-the-box lending software aims to simplify implementation and reduce the time and resources needed for customization and development, making it a more accessible option for lenders seeking a cost-effective, quick-to-deploy solution.

Again, when weighing customizable vs. out-of-the-box software, you must keep in mind the needs of your organization. In most cases, an out-of-the-box lending software can provide the basic functionality you need to cost-effectively power your lending business. 

Advantages of an Out-of-the-Box Lending Software

Here are some of the benefits of an out-of-the-box lending solution:

1. Cost-Effective: out-of-the-box lending solutions are priced more reasonably than custom-built software, as it’s a single version rolled out for all SME lenders. A fixed price is set by the vendor, making it much easier to budget. You know exactly what you get, and exactly what you will pay.
2. Short Implementation Timeline: Since the features of out-of-the-box lending software  are tried, tested, and approved by the vendor prior to the sale, SME lenders can start using it as soon as they have it deployed. This can be useful in front-facing alternative lending workflows, enabling you to connect faster with borrowers.
3. Streamlined Support: out-of-the-box lending software comes with built-in customer support, providing users with access to technical assistance, updates, and maintenance services. This means businesses can easily get help if they encounter any issues, minimizing the impact of downtime and other costly glitches.

Disadvantages of an Out-of-the-Box Lending Software

Alas, before you commit to out-of-the-box lending software, be sure to consider the disadvantages:

1. Potential for Functionality Gaps: When compared to customizable lending software, out-of-the-box lending software might fall short on features. This can be a problem for SME lenders who have unique requirements, such as a specific loan origination feature tailored to your market.
2. Limited Integrations: SME lenders may rely on multiple software solutions to complete a wide variety of tasks at different stages of their lending workflow. Many out-of-the-box lending software solutions don’t have the capacity to integrate with a large number of partners. This limitation can be attributed to the generic, one-size-fits-all approach taken by such vendors, which prioritizes ease of use and quick implementation over extensive customization capabilities.
3. Scalability concerns: Out-of-the-box software may not scale efficiently as a business grows or its needs evolve. Custom software can be designed to handle increased workloads and accommodate growth more effectively.

Onyx IQ: Ready-to-Go With The Right Touch of Customization

The customizable vs. out-of-the-box debate doesn’t have to be an either/or decision.

At Onyx IQ, we understand that each SME lender has unique goals, clients, and methodologies to accomplish their objectives. They need a software solution that can rise to the occasion and cover their needs.

That said,  alternative lending operations (especially those focused on SME lending) usually have a tighter budget when compared to larger financial institutions. They must keep the total cost of ownership down, but they still need industry-leading features.

Onyx IQ offers lenders an all-in-one loan management software that you can immediately put to use, and includes the right amount of customization when it comes to workflows, templates, and integrations—we’re even open to your requests for further customization.We keep you within budget, give you the features you need to scale, and can work with you to develop custom workflows as new needs arise. To learn more, reach out and demo Onyx IQ today.