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How digital loan applications can help financial institutions

Sep 07, 2022

Small banks, credit unions and community banks have a long-standing reputation for building strong personal relationships with local small business owners. In fact, community banks provide more than 60% of small business loans across the country.

But the lack of a digital environment in many small banks across the country makes basic bank operations for U.S. small businesses much more difficult than it needs to be. The small business loan application process is one of the products small businesses depend on to ensure they have the resources to take on new opportunities during this time of rapid change.

Here are three areas where small banks can start to re-evaluate their loan process so they can better serve small businesses.

1. Complicated paper-based loan application

Paper-based loan application processes are costly to both small banks and small businesses. The process requires employee time on low-value tasks such as printing applications, scanning emailing, managing sensitive documents and chasing down handwritten signatures.

Implementing a digital small business loan application process makes it easier for small businesses to access and complete loan applications at their convenience. In addition, bank personnel can receive and process completed applications and accompanying documents in a matter of hours rather than days. This allows the bank more space to process more applications in a shorter span of time, making room to service more small business clients faster when they need it most.

Digitizing the loan application process virtually eliminates the possibility of losing documents containing sensitive client information. Documents can be stored online in the cloud where banks can still meet regulatory requirements while ensuring that the information is accessible to both the bank and the business client.

2. Cumbersome signing processes

Some banks have adopted the use of third-party e-signature applications to help organize the client signing process, however this solution does not come without challenges.

Rather than having to meet in-person with the business client, a fully automated online business loan application process captures each interaction the bank and small business client has with the application. The type of data collected includes past loan payment history and queries from the client.

E-signature solutions do come with some risk of fraud that must be addressed in a highly regulated environment like small banks and business loans. It’s also difficult to decipher which signatures are authorized to sign off on loan applications.

Digital loan documents can be created, stored, and distributed through the cloud to capture applicant information. The steps to complete the form can be automated to guide the applicant through the input of their private information.

This information can be verified while entering the data, alerting the applicant to errors along the way. There is much less chance of losing any documents containing sensitive client information when using a digital application process.

3. Challenging account management systems

Improving the small business loan application process does not end once the application is approved. Account management can be automated using proper software that benefits both the small bank and the business client.

Automation can streamline end-to-end small bank financial operations in ways that make it easier for small businesses to make the decision to do business with community banks and credit unions.

If a client is looking to add on another loan product to what they already have, they may have to provide credit bureau information. An automated loan application system can sync with all the major credit bureaus to pull recent data and update it without having to wait for the business client to provide that information on their own.

Business clients can be alerted to upcoming or overdue payments, giving them an opportunity to ensure they stay on schedule. This is also an opportunity for the bank to build their relationship with the client digitally to ensure the client doesn’t incur “bad debt.” This opens the door for the client to seek solutions early should there be a problem with paying on time. 

How Wipfli can help

Wipfli’s team combines the knowledge of tech and financial institutions to deliver the results you need today. See how we can help you connect, transform and grow on our digital services for financial institutions web page or learn more by reading these additional articles:


Zak Dabbas
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