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Why Automation is a “Must Have” for Small Business Lenders

Woman holding a smartphone in her hand.

Automation is not just a trendy word.

Automating lending workflows is a necessity for small business lenders who want to turn big profits and scale their businesses

If you’re still using paper-based workflows and repeating tasks to manage your SME lending like it’s 2010, you’re leaving money on the table and putting the future of your business in jeopardy. 

Without automation (we’ll unpack what automation means in an SME lending context in just a moment), your business will suffer in every area when compared to competitors—from customer experience to decision-making speed. 

If any one of the steps in the detailed lending process creates a bottleneck for your business, you could be wasting time and money, and, ultimately, losing deals. 

In this piece, we’re going to explain why automation is essential for small business lenders and examine lending operations that must be automated for the future success of your business. 

Why Automation Matters in SMB Lending

Every lender, no matter their level of experience or background, is well acquainted with how labor-intensive the lending process can be, especially if even one step requires manual input, review, or override.

Mountains of forms, lack of data due to unintegrated platforms, inaccuracies brought by repetitive input—these are just some of the typical lending bottlenecks. 

Automation delivers three overall benefits for SME lenders:

  1. It significantly reduces errors and risk. 
  2. It allows for an increase in volume to scale your business.
  3. It saves substantial costs. 

Let’s look at how automation addresses five specific challenges for small business lenders, from client management to the customer experience and everything in between.

1) Client Management

The application and onboarding process alone means a pile of daunting paperwork—a pain point for both borrowers and lenders.

An average small business owner might spend 25 hours on paperwork before obtaining funds.  

Automating loan origination, one integral part of client management, could make a huge difference. A configurable loan application allows applicants to complete dynamic forms online, from any device. Eliminate irrelevant form fields to customize each loan application to the needs of each business and the type of loan requested. 

The application process used to take three to five weeks. Automation means it can be done in five minutes. Not only that: the collected information is then put directly into the lender’s loan origination platform, eliminating what more than 56% of lenders say is their biggest challenge. 

Automating client management tasks like loan origination helps ensure that every record of financial data, no matter how it is collected, stays consistent and accurate. 

2) Credit Evaluations and Risk Assessment

Post-onboarding comes the process of transferring the borrower’s information into the appropriate lending analysis channels—financial spreading must be as efficient as possible, as it’s your way of identifying risk and making decisions about the borrower’s standing. 

And yet, it’s often a tedious practice. 

Manually applying a lending institution’s set of rules to a borrower’s financial data is next to impossible, and leaves your lending business open to risk and error. If the data doesn’t live in a single system, you are continuously cross-referencing to build an assessment and reach a decision.  

Automating the evaluation process with business credit scorecards eliminates the need to build a manual credit scoring model for each applicant. This ultimately results in faster loan decisions and more accurate risk evaluations. Businesses can even automate how they keep the applicant apprised of their current status, reducing phone calls and email volume thanks to automatic notifications. 

Finally, another point to keep in mind is that the collection/analysis of sensitive data is going to require a lot of signatures

This single, seemingly inconsequential task can create a huge bottleneck for your lending business. One DocuSign study reported a 95% decrease in loan processing time (from over an hour down to five minutes) for an Arizona credit union. 

3) Portfolio Risk Management

After you give a borrower an initial response, their financial position regarding their loan evolves.

As exposures develop, lenders have to continue to glean details within the portfolio and identify risk limits that are not only theoretical. Putting risk-based portfolio limitations into practice requires advanced reporting technology with access to real-time customer data. Part of risk management is also the continuous monitoring for fraud or cyber-attacks

Reports and financial dashboards offer a snapshot based on key performance indicators important to the lender and other relevant stakeholders (investors, employees, syndicators, etc.). Reporting can answer questions like: 

  • Is my risk analysis working and continuously improving? 
  • What shared characteristics do my most profitable customers have?
  • What is our business’ average time from application to funding? How does this compare over the last few weeks or months?

Both lenders and stakeholders need reports that continue to evolve along with the financial profile of their borrowers. Don’t forget that reporting is a key part of compliance: adapting to meet new regulations as they emerge could be a headache if your reporting isn’t easy to collect. 

A cloud-based lending platform like Onyx IQ collects, processes, and formats all required data relevant to each individual stakeholder for easy-to-digest, customized reports. Institutional grade reports are no problem, be it static pool reports, raw data reports, syndication reports, and more.

4) Operational Costs and Human Capital

Traditionally, in order for a business to make a higher profit, it increases its human capital. 

In other words, more employees get more work done, and a business grows its revenue. For lending businesses, profit is achieved through volume. However, deploying automation decouples profitability and labor, instead capitalizing on what current resources are capable of completing or how quickly they can complete tasks. 

The benefits here are plentiful across the lending workflow: more applications, more closed deals, and faster processing times. One McKinsey study points to a 40% reduction in cost per origination. 

Operational costs can soar due to human errors or wasted resources if automation isn’t effectively utilized, particularly within the process of loan repayment

Even the largest banks/lenders make human errors in the loan collection stage, as evidenced by the 35 billion dollar blunder by one of Germany’s largest banks back in 2018. Again, no two customers are the same. The repayment strategy, frequency of payments, and amount depend on the type of loan and require real-time data to be determined.

Automation can help lenders segment high-priority collections, reduce or even eliminate compliance litigations, and leverage historical data to better predict and prepare for future collections.

5) Customer Experience 

Your business doesn’t exist without satisfied clients. 

The Financial Brand reports that slow loan processing is the single biggest pain point for millennial customers. Speed, communication, and transparency are required if you want to optimize your business’ client management processes. 

Utilizing a cloud-based system can ensure customers receive timely, consistent communications regarding the status of their loans. 

Automation can also help lenders leverage the digital communication preferences of borrowers–one recent McKinsey report noted that payment rates soared to as much as 92% when lenders shifted their collections communications to the more engaging channels of email, SMS, and mobile. 

Digitizing the statement process also enhances the customer experience by enabling customers to self-serve and check the status of their loan repayment anytime. This saves time eliminating the need for one-on-one communication or waiting for a response. Payment alerts and reminders can be sent automatically through whatever channel the customer prefers. 

Automation is a must-have to address these challenges and so many more within your lending business. By automating nearly every stage of the lending process, your business can provide a superior customer experience and realize new levels of profitability.  

Onyx IQ: Experience the Power of Lending Automation

With the right automation software, nothing can stand in the way of your lending success.

While it may be tempting to improve the credit process one stage at a time, McKinsey says (in the study cited above) that these attempts often become “incremental, lose customer focus, and miss the big-picture opportunity to deliver a fundamental step change in performance and approach.” 

Onyx IQ is the fully automated end-to-end loan management solution you’ve been looking for. Request a demo today (it only takes 45 minutes!) or get in touch with us at

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