How Can Loan Automation Process Help Your Business?

loan automation

The commercial lending landscape has been long known for its intricacies leaving both lenders and borrowers in a time-consuming web. Thankfully, technological advancements are hacking away at this maze, paving the way for a smoother loan origination process.

This digital revolution streamlines workflow and unlocks new levels of operational efficiency, benefiting everyone involved. In this blog post we’ll get into detail on the challenges faced by commercial lenders today, exploring some of the common pain points and demonstrating how loan automation can help unlock more efficiency. 

Diagnosing the Problem

Commercial lending focuses on generating economic benefit by funding enterprises and ensures the lender can make a profit, manage risks, and create shareholder value.

According to a study, on a dataset of 48000 loans, more than 60% of them are closed later than the actual closing date.

Manually analyzing the creditworthiness of a business can be daunting and is a challenging task. Therefore, the financial tools that you use have a significant impact on underwriting, approval, cost, and scale of any unexpected losses. So when fintech companies adopt automation they are looking for ways to overcome these challenges so they can improve the quality of the loan portfolio and deliver customer satisfaction.

Why do many banks struggle with loan processing?

Many banks still use manual paper-based loan approval processes that don’t connect with the digital world. This results in slower decision-making times, frustrates customers, and creates problems with internal data management that increase the workload of bankers.

Commercial loans have different types of complex processes that come in all sizes. Let’s see one of the most commonly used manual underwriting methods – spreadsheets. They represent the typical challenge that bankers face in today’s competitive banking world. Spreadsheets are a great tool but their creators might have overlooked their application to underwriting.

Underwriting using spreadsheets is a cumbersome process as entering the financial data can be time-consuming and there are more chances of losing uniformity over time. Sometimes, the data entered in the spreadsheet is directly uploaded into the lender’s other core systems which can lead to creating duplicate records of the same data. The spreadsheet for underwriting has some serious flaws in terms of storage, lineage, retrieval, and portfolio insight perspective.

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Automating the Loan Process

Here is a typical loan process. Every banker would immediately recognize the steps by looking at the image.

Loan automation

Customer Experience

The first step in the loan process would be to collect necessary financial information from customers and prospects. The problem with this task is that when done manually can be labor intensive and tedious to complete. In most banks, it is done using forms, electronic and printed documents, and obtaining physical documents from customers. The information collected from these paper documents is re-entered in the lender’s portal but the possibility of inaccuracy and errors in data is high.

Improving customer experience using automation

Well, bankers can easily overcome this by using automation. Automation can eliminate inconsistency and delays in manual data collection. Client portal software can facilitate the digital onboarding of new prospects and information of existing clients straight into the lender’s system. Once the customer information is received, you can automate the process using a set of predefined rules. Here you can differentiate between loan applications that are completed and applications that need more documentation.

There are advanced automation tools that are capable of pre-populating information in the customer fields. This feature is more useful when it comes to importing customer ownership hierarchies. Using such advanced platforms you can visually depict the relationship between your customers and your organization, create and visualize organizational diagrams, and upload customer information automatically. For bigger organizations with complex workflows, importing such information automatically can be a huge relief from the administrative burden.

Credit automation

How many times do bankers need to rekey customer information into the lender’s system whenever some changes to the borrower’s details or change in ownership structure? Would it not be simpler for CRM workflow systems to integrate seamlessly with the loan automation systems for uninterrupted data flow? It happens when you choose the best loan origination platforms.

Fintech companies and banking institutions in general often struggle with siloed data where different departments maintain separate records of the same customer. This not only creates inefficiencies but also increases the risk of errors.

Therefore, you will need automated credit origination platforms. These platforms offer a centralized repository to store all customer information and documents at a single location. This acts as a single source of truth that can only be accessed by authorized personnel across different departments and multiple locations electronically.

User roles and access controls ensure that only employees with appropriate permissions can view specific data thereby safeguarding sensitive information. This approach surpasses traditional, open-access file systems and provides a more secure and auditable environment for compliance regulation and internal controls.

Credit Evaluation

Credit risk evaluation is a crucial yet tedious step in commercial risk assessment and is one process best suited for automation. Manual data entry is prone to error and time-consuming. Here’s where automation shines:

Automation helps with effortless data extraction. Advanced loan origination software can connect to a browser’s accounting system and tax return portals securely (with permission). This eliminates manual data entry and the risk of typos.

Automation results in accurate financial spreads. The data is extracted automatically and is populated in pre-defined templates which ensures consistency and reduces errors in financial spreads. Credit analysis can focus on analyzing financial data and identifying key risk factors.

Automation enables faster analysis and informed decisions as it frees up valuable time for your analysts allowing them to delve deeper into analyzing the borrower’s financial health and make quicker more informed lending decisions.

You are unlocking even greater opportunities by combining automated customer management and credit analysis tools within a single loan origination system. For instance, when a bank lends money to a borrower, it generally needs the individual financial statement to analyze the risks. However, with the right loan processing automation platform and lending policies, the system can perform the risk analysis and consolidate results based on which ratings are applied. This cascaded approach where ratings flow down from the parent entity significantly reduces the time needed for risk assessment.

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Credit Proposal and Authorization

The key to faster loan approvals lies in leveraging automation technology to gather the right data efficiently and present it in a clear format for making informed credit decisions. Automating the entire loan process unlocks several benefits – increased accuracy, real-time data access, and faster turnaround times.

When bankers gather customer information, analyze their financial statements, and undertake risk ratings, they can piece together projected scenarios of their lending interest. If positive, the next step is to create a credit memo or loan application for the risk department’s approval.

Many lenders use a manual paper-based approach for processing credit applications which becomes a burden to assemble numerous interconnected documents in a specific format. This can be time-consuming and tedious, especially for new clients which significantly slows down loan approvals.

An automated credit application solution streamlines the entire loan process by combining customer management, financial analysis, and risk assessment functions. It also integrates loan structuring tools, collateral management systems, and electronic credit memos. Some leading automation platforms seamlessly connect with your existing systems for performing these tasks, making automation an effortless solution.

While the final loan decision remains human-driven in commercial lending due to the unique nature of each loan, automation plays an important role. For high-volume, lower-value loans tome software allows for “auto-decisioning” based on predefined lender policies. This approach is widely used in retail credit and is making its way into commercial lending as well.

In addition to this, mobile technology also plays a vital role in the loan automation process. Lenders are equipping their executives with mobile-friendly loan applications, allowing them to review and approve loans on the go, drastically reducing approval times.

Compliance Monitoring

Obtaining a loan is just the first step. Banks face some serious challenges in managing the loaned assets. This includes monitoring the borrower’s financial health and accompanying risks. They are monitored frequently – it can happen annually, quarterly, or even monthly.

Banks struggle to establish a standardized process to gather financial information. This data is crucial for meeting the basic eligibility requirements. They are the covenants, addressing exceptions to bank policies, and triggering timely reviews. Using a manual approach can lead to unclear procedures, the process becomes inefficient and increases risks.

A standalone automated loan processing system can integrate with your existing system and offers significant advantages in terms of data accuracy, efficiency, and overall effectiveness.

  • Capturing covenant details during the loan application process becomes simpler and it eliminates the need for manual re-entry. This ensures that borrower’s information is directly linked to the loan approval record and it helps streamline audits.
  • An automated system ensures covenants and reviews are collected timely which gives lenders peace of mind. It comes with built-in calendar alerts to notify the timely collection of necessary data.
  • Automated notifications can be triggered when there is a breach in documentation or unmet covenants. Additionally, automated testing can analyze incoming information and trigger immediate alerts for potential and imminent breaches.

This integrated approach streamlines loan management, reduces errors, and empowers proactive risk mitigation.

Investment Risk Mitigation

Traditional loan underwriting depends on paper documents which creates significant blind spots for lenders. They don’t give a comprehensive perspective of the loan portfolio’s risk exposure and how it can evolve. Lenders in general establish high risk tolerance levels and set portfolio limits and measures based on these can become ineffective without accurate up-to-date portfolio reporting. Sticking to manual methods can simply elevate risk and it becomes difficult to manage without real-time insights.

A compelling reason to automate the loan origination process lies in its ability to significantly improve data integrity and overall governance over time. With automation within a single platform, you can streamline data management and mitigate investment risk effectively. It minimizes manual entry errors, ensures a clear data trail, and enforces robust governance policies. This translates to consistent updated data readily available for risk analysis. Lenders can gain timely insights into their loan portfolio which allows them to proactively handle risks.

Automation is also necessary for optimizing capital usage. Overestimating risk in borrower’s loans can be expensive. Automating the loan process ensures data accuracy and stronger controls. Taking it a step further, using powerful reporting tools can unlock valuable insights from user’s loan portfolios and help lenders make informed financial decisions.

Lending Automation Examples

Lending automation can be applied to various stages of loan processing to make things faster for the lenders and the borrowers.

1. Automated pre-defined qualifications

Imagine a borrower is considering a mortgage and they visit a lender’s website and answer a few questions such as their income, credit history, credit score, and desired loan amount. The system can provide eligible loan options using the predefined programmed rules that instantly check the borrower’s eligibility criteria.

2. Document management

Gathering information and covering it in paperwork is the tedious part of a loan process. Here automation can help by connecting to a borrower’s bank account and automatically retrieving the income verification documents. This increases safety and borrowers can safely upload their documents through user-friendly portals.

3. AI-powered underwriting

Underwriting is the process of evaluating a borrower’s creditworthiness. Traditionally it is done manually. Nowadays, lenders are leveraging the power of artificial intelligence (AI) to analyze vast amounts of data and recommend loan approvals or denials with greater efficiency. However, human underwriting still plays a crucial role in the final decision-making.

4. Simplified repayment process

Automation makes loan repayments simpler where borrowers can set up automatic transfers from their checking accounts to ensure timely payments and avoid late fees.

5. Mortgage automation

Mortgage loan automation is a specific type of lending automation that is focused on streamlining the home loan process. Automation can benefit in the following ways:

  • Income and asset verification can be automated as traditional methods involve verifying a borrower’s income and assets manually. They go through each and every pay stub and bank statement. Automation can utilize secure connections with the borrower’s bank or the employer to electronically retrieve this information which reduces processing time.
  • Smart document review using OCR technology can scan documents and tax returns extracting key data points and populating them into the loan application thereby minimizing manual data entry and potential errors.
  • RPA bots can be employed to automate repetitive tasks in the mortgage process. For instance, an RPA bot can handle tasks like sending automated email reminders to borrowers for missed documents or following up with credit bureaus for verification.
  • With predefined conditions, lenders can use AI algorithms to analyze a borrower’s financial profile to provide them with the best mortgage loan offer.
  • Automated communication and updates keep lenders and borrowers informed throughout the mortgage process. Automation can deliver personalized email or text message updates on the status of their loan application thereby reducing the need for manual communication.

Automated Lending Platform

Automated loan processing system is a cloud-based software that leverages cutting-edge technology to transform the entire loan application process. It helps reduce manual paperwork and in-person meetings.

With automated lending platforms you can have:

  • Faster processing where you can quickly identify applications that meet the eligibility criteria, automate underwriting, and get funds to the borrowers faster.
  • Eliminate manual data entry and streamline the loan cycle thereby freeing up your team’s productive time.
  • Reduced errors due to enhanced accuracy with automated calculations and decision-making based on predefined rules.
  • 24/7 access and support which provides borrowers with a secure online portal to manage tier loans anytime, anywhere.
  • Increased security features to protect borrower’s sensitive financial information.

Therefore, automated loan processing systems can create smoother and more efficient experiences for both customers and lenders.

Must-have features:

Streamlined onboarding:

  • Easily customizable application forms to fit the different loan types and gather necessary information efficiently.
  • Set up automated checks for borrower’s eligibility requirements like income, location, and credit score.

Automated data management:

  • Extract data automatically from uploaded documents reducing manual data entry work.
  • Ensure data accuracy with built-in validation tools to identify potential inconsistencies.

Efficient underwriting:

  • Provide borrowers with a secure online portal to track their applications, submit and store documents, and manage loans.
  • Offer automated notifications and updates on application status and loan decisions with improved real-time communication.

Security and compliance:

  • Ensure the sensitive financial information of the borrowers is protected with strong encryption protocols.
  • Ensure a clear record is maintained for all loan activity for compliance purposes.

In addition to these, opt for a cloud-based solution for easy accessibility and scalability. Also ensure that the system can generate reports to track loan performance, identify trends, and optimize the lending process. Finally, look for a system that can seamlessly integrate with your existing banking and accounting software.

Here is a list of some of the best loan management systems.

1. Cflow

Cflow is a no-code workflow automation platform designed to efficiently streamline your loan processing. It can automate specific tasks within the loan process and comprehensively handle the lending process.

Cflow is a robust financial tool that comes with pre-defined templates for capturing data, you can set conditional rules and automate repetitive tasks precisely. Cflow can automate tasks such as data collection, approval routing, document management, and communication between lenders and borrowers.

Cflow offers audit trails which are useful for compliance requirements and all customer information is secured with sophisticated encryption. In addition, it also offers seamless integration and advanced reporting and data analytics which helps lenders to make informed credit decisions.

2. FinnOne Neo Loan Management System

FinnOne Neo loan management system offers a comprehensive solution for banks and financial institutions to help automate their loan processes and centralize all aspects of loans and lease servicing.

FinnOne Neo offers a wide range of features such as different methods for interest accrual, handling payments, integrated accounting, contactless processing, and loan restructuring, support balance transfers, residual value calculations, and depreciation, generates personalized statements, facilitates real-time simulations, document management in image formats, emails, sms and letters through a user-friendly interface.

3. Lending Factory

Lending Factory is a loan management platform from Pennant Technologies that offers streamlined digital onboarding and loan management solutions. It offers seamless integration with features like rule-based duplicate checks, KYC capture, and configurable accounting rules for ensuring accurate financial tracking.

Lending Factory has an extensive API library with over 150 APIs facilitating effortless integration with internal and external systems. It also offers streamlined workflows to automate tasks in loan processing and credit approvals. You can choose from self-service, agent assistant, or chatbot-guided onboarding to cater to diverse customer needs. In addition, it offers simulation models for different loan scenarios, multiple accrual, and amortization methods.

4. Cloudbankin

Cloudbankin by Habile Technologies is a low-code platform that provides a comprehensive suite of features for digitizing the lending process from origination to management. Some of its key functionalities include:

Fast disbursement of loans within 10 minutes with a significant reduction in turnaround time and a fully automated and customizable onboarding process. Cloudbankin streamlines data collection, eKYC verification, and document management and integrates smoothly with your existing platforms.

Cloudbankin offers an end-to-end solution for managing the entire loan lifecycle, dynamic workflow management, and holistic solutions for various financial institutions like banks, NBFCs (non-banking financial companies), and microfinance institutions with tailored lending solutions.

5. NetOxygen LOS

Wipro’s NetOxygen Loan Origination Solution (LOS) is designed to streamline the loan application process for lenders. Its key features include automating manual tasks such as document collection, verification, and underwriting.

NetOxygen also offers digital and multichannel solutions that allow borrowers to initiate and complete applications online through a centralized system that can be accessed anywhere and anytime. It supports various channels such as retail, consumer, wholesale, and correspondent lending.

Future of Loan Automation

The rise of automated platforms is revolutionizing the loan participation landscape leading to a bigger transformation. These platforms are more than just tools. They are comprehensive systems designed to manage and optimize processes for both lenders and borrowers.

By integrating digital workflows, automated platforms offer newfound flexibility in managing loan portfolios. This translates to gaining greater efficiency, slashing the time needed to publish and close loans. As automation takes center stage, traditional manual methods are slowly fading out.

Automation can unlock new opportunities beyond limits. These platforms can empower banks to navigate limitations imposed by lending caps and concentration risks. They facilitate managing loans of all sizes ensuring valuable client and lender relationships are preserved. This fosters a win-win situation for all the parties involved.

The practical benefits of automated lending platforms are evident in the banking sector. Banks have leveraged them to tackle challenges like managing large loan portfolios, navigating frequent transactions and rate fluctuations, and modernizing workflows. Automation has streamlined operations and enables fintech companies to better allocate their resources and propel towards growth while minimizing risk.


The commercial lending landscape is undergoing a digital metamorphosis and many of the traditional fintech companies have begun to recognize the need to adapt and keep pace with their tech fintech competitors. Automation isn’t a workforce replacement; it’s a force multiplier. It streamlines lenders by enhancing their efficiency, risk analysis, and relationship building. Also, they help in cost-cutting, facilitating compliance monitoring, and unlocking data-driven insights for informed decision-making. 

Don’t get left behind. Cflow can be your guide on the path to loan automation. We offer comprehensive solutions to optimize your lending process and propel your business forward. Visit us today for a free demo and unlock the power of automation for your business.

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