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The 5 Big Inefficiencies in Private Lending

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Zach Cohen

May 15, 2023

Most lenders use over 10 software systems to manage their day-to-day lending operations. Between Email, Word, Excel, Loan Origination Systems, Loan Servicing Systems, Document Management Systems, Borrower Portals, Online Loan Applications, Project Management Tools, Underwriting Systems, and more; lenders are missing out on efficiency opportunities by not having their tools work together.

This article identifies the 5 biggest sources of inefficiency for private lenders and provides solutions for each one.

The 5 Sources of Inefficiency

1. Document Management

Document Management is one of the most significant sources of time consumption for lenders. This all encompassing category includes: how and where you store documents, version management, duplicates, document generation, document checklists and comments, and document review. Quotes, Payoffs Statements, Loan Documents, and pre-approval letters are just a few examples of the documents that lenders create everyday. Many lenders use Excel sheets with VBA code to populate word templates and others manually populate document templates. These documents and others then get stored in multiple places, reviewed, and commented on by different teams. Not to mention, processing teams then have to keep track of which documents have been collected and which are still pending. This process fragmentation creates an operational efficiency problem for lenders and negatively impacts their borrowers’ experience.

2. Payments

Lenders and servicers spend hours every month collecting payments from their borrowers and managing payouts to there investors. You shouldn’t have to format a custom .csv every time you want to process payments using a third party payment processor. Additionally, you shouldn’t then have to manually updated your loan accounting/ledger system, to track your payment collections,  and payouts. These are two key pieces of payment process that can benefit from automation.

3. Transferring From Origination

Another big miss for lenders is using an origination system that doesn’t connect with servicing. When you originate loans under one system and then service them under another system, you end up doing some of the same work twice. Not to mention, you are creating an opportunity for user error that’s not necessary.

4. Custom Reports

Collecting data about the performance of your loan portfolio is a crucial part making sure you stay on top of your performing and delinquent loans and track the performance of your lending operations. Lending managers end up having to manually pull data from different systems into excel so that they can have all of the data in one place. It takes time to collect this data and more time to manipulate that data so that it can be useful.

5. Clean Information Architecture

One source of inefficiency that most lenders don’t focus on when they’re working on optimizing their lending operations is Information Architecture.

What does that mean?

You know when you look at a screen and then spend 30 seconds searching for the particular data point your interested in?

This is information architecture. Simply put:

“A way of organizing information on a screen so that it is easy to find.”

This may not seem like a big issue but, when you spend 15-30 seconds every time you’re looking for a key piece of information in your systems, that time adds up. We estimate originators and servicers waist two hours a day just looking for key information in their systems.

The Solution

The best way to resolve these problems is to use a better Loan Management System. BaselineLMS has created a connected originated and servicing ecosystem specifically designed to solve these 5 problems. Equipped with simple document management, payment automation, connected origination and servicing, custom reporting, and world class UX design, lenders achieve significant operational efficiency increases by using BaselineLMS.

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