Tackling Middle-Market Loan Complexity With Loan Management Software

Commercial loan origination and management, and particularly middle-market lending, is no simple task. Compared to consumer loans, commercial loans typically involve substantially more data and document collection, rigorous underwriting, and ongoing management.

Why the complexity? Because, as loan size increases, lending naturally becomes much more complex and is marked by a high degree of loan structure variation. Many commercial loans have bespoke structures with varying interest rates, payment structures, and covenants. A single portfolio might contain asset-based loans, revolving facilities, and amortizing loans.

All of this underscores the need for robust loan management software. Yet the reality is that commercial lenders have had very limited technology options capable of handling the complexity of commercial lending. As a result, lenders today predominantly underwrite and manage loans manually.

Fortunately, the tide is starting to turn. Next-generation loan origination software has arrived on the scene, and we’re starting to see middle-market lenders adopt new software that effectively automates processes. This article will dive into the benefits and key features of these end-to-end loan origination software systems, and contrast these solutions with traditional loan management.

The Traditional Challenges of Commercial Lending

Many commercial lenders continue to rely on tedious, labor-intensive processes that demand substantial overhead costs and increases the risk of error. For a lender who has not yet embraced digital transformation and implemented end-to-end software, the typical management process may appear as follows:

  • Data aggregation: Data in various platforms and formats (parametric, dynamic, and conditional) needs to be sifted through, organized, and formatted properly.
  • Performing calculations: Business logic — or algorithms — must be applied to the data to derive meaningful results. However, this process cannot be easily automated, as algorithms are often unique to the specific loan.
  • Reporting and distribution: The results must then be transferred into reports, accounting systems, and other systems so that the proper action can be taken.
  • Auditing: Even once all the above steps are done, the work isn’t over. Data must be maintained and checked for accuracy and compliance on a regular basis.

Digital Transformation in Commercial Lending

It’s no surprise that lenders are starting to ask, “there must be a better way.” The process outlined above is clearly not sustainable — especially as businesses scale and their portfolios diversify. The good news is, more and more lenders are embracing digital transformation and shifting their manual processes to automated ones. Enabling this shift is the launch of new loan management software systems that allow lenders to aggregate, analyze, and monitor data that much faster — and with fewer errors.

These next-generation solutions feature tools for every step of commercial loan origination and servicing — such as CRM, document management, deal pipeline automation, compliance management, portfolio analytics, and so much more. With the help of automated technology, lenders are now able to glean meaningful data, underwrite and service loans that much faster, reduce risk, and alleviate overhead costs.

Finding the Right Loan Origination Software

It’s important to keep in mind that no two loan management software systems are alike. When looking for a solution, be sure to zero in on one that:

  • Supports Every Step of the Loan Lifecycle

Not every software solution will provide the feature set that’s needed to manage the full loan lifecycle. Many lenders are finding that they need to license multiple SaaS solutions and build custom integrations in order to address all their loan management needs.

  • Supports Varied and Custom Loan Structures

Some software solutions only support certain loan structures, while others do offer broad support but it’s spread out across multiple modules. For a faster, more streamlined origination process, it’s important to choose a solution that makes it easy to manage diverse loans within one portfolio and service bespoke facilities.

The Importance of AI-Driven, End-to-End Loan Management Software

Many solutions claim to be end-to-end, but not all can stand up to this claim. If you want to avoid the hassle of costly licensing fees, extensive software integrations, and burdensome management of custom loans, then you’ll need to find software that’s truly end-to-end — that is, featuring tools to manage the full loan lifecycle.

Axis by AIO Logic is the first of its kind in the commercial lending software space. Our loan origination and servicing solution lays out all the tools you need in one easy-to-use platform while harnessing AI to automate processes and generate custom algorithms. You’ll be able to manage diverse portfolios with greater ease and free up time spent on data aggregation and analysis.

Want to give our solution a try? Contact us for a free demo.