3 Ways to Process SBA Loans Faster & Improve Customer Experience
Customers expect shorter loan processing times after the financial industry's recent digital transformation. Learn how automated document collection can speed up your SBA loan process.
History was made on April 3, 2020, as it is now known as a day of reckoning for commercial lenders. The newly-signed Coronavirus Aid, Relief, and Economic Security (CARES) Act released a whirlwind of opportunity for lenders—particularly those willing to up their loan processing game in response to demand.
Years later, we can see what a huge impact the Payment Protection Program (PPP), a subset of the CARES Act, has had—not just in terms of propping up the economy but also in ramping up customer expectations for service. The three-month lender processing time just won’t fly in the post-PPP era.
Read on for a breakdown of how PPP forever changed loan processing, the current industry constraints, and how commercial lenders can improve loan processing times.
PPP Created Unprecedented Demand for SBA Loans
Although the PPP evolved in just eight days amid the global COVID-19 crisis, banks and credit unions distributed 14 years' worth of federal loans in just 14 days. A monumental shift in capabilities was triggered when the Small Business Administration (SBA) approved $11.8 million in forgivable loans.
The Payment Protection Program (PPP) called for all hands on deck to manage the tidal wave of demand that swept through the commercial lending sector. Ultimately, the relief program distributed $800 billion worth of business loans.
Most loans (90%) were $50,000 or less—mostly given to small businesses. The impact was significant:
At the height of the global pandemic, PPP loans increased a business’s likelihood of survival by 14-30%. Across 50 states, PPP covered an estimated 72-96% of small business payroll.
Chase, the largest US bank, issued 269,424 loans (totaling $29M+) by June 2020, and community banks distributed 28% of the loans, or $148 billion. Lenders described the early days of the PPP as “hectic chaos,” “round-the-clock work,” or “flying by the seat of our pants.” Despite the wild ride at the outset, PPP was an incredible achievement, demonstrating the agility that is possible in lending. On average, borrowers waited anywhere from 3.7 to 14 days for loan processing.
PPP accelerated digital transformation for many commercial banks. Fountainhead Commercial Capital CEO Chris Hurn referred to branches as “mausoleums” because of online banking trends—people no longer need to walk into a brick-and-mortar storefront anymore.
The Pitfalls of Current SBA Loan Process Times
Now that the dust has settled and PPP has left its mark on loan processing, it’s worth reflecting on where industry benchmarks for SBA loan process time lie and how commercial lenders can improve performance.
Fundera breaks down the current SBA loan process and estimates the timeline as follows:
Borrowers gather and submit their documentation.
+ 10-14 days
Lenders underwrite the loans.
+ 10-21 days
Lenders approve the loans and send commitment letters.
+ 7-14 days
Lenders close on the loan.
Total = 60-90 days
All steps considered, the total loan process takes somewhere between 60-90 days.
Clear, consistent communication is the shot of espresso that gets these loans moving along. The most significant time drain is the applicant’s ability to pull together all the necessary material for the application. Yet, much of the onus for document requests and managing the information flow falls on the lender’s shoulders. The lightning-fast pace of the PPP process set a new bar.
Today’s customers expect lenders to streamline the commercial loan approval processes and create a seamless, intuitive experience. Just as the US education system strives to “leave no child behind,” our commercial loan process must “leave no document behind.”
For lenders, customer satisfaction is only part of the process. With decreasing profit margins due to inflated commissions, brick-and-mortar leases, equipment costs, utilities, and other expenses, “business-as-usual” is simply unsustainable. Process automation is the juggernaut that lifts the burden of operational costs, bumps productivity, improves the employee experience, and minimizes the risk of human error.
How Fundera Slashed Loan Document Turnaround Times by 64% with FileInvite
Working out of spreadsheets, receiving attachments in emails and with 20 to 30 documents to juggle across every application, Fundera were looking for a total solution to their document collection workflow. They found this automated solution in FileInvite.
Technology is the Catalyst for Growth in Commercial Lending
Increased competition from fintech companies willing to embrace technology for a faster trajectory and economies of scale leaves commercial lenders no choice but to modernize or fall flat. Working with a people-first partner like FileInvite guarantees a smooth-sailing transition into the digital era.
“It’s a pace that simply couldn’t be achieved without the help of technology,” Barron’s said of the PPP era. When it came to PPP loan processing, the top 15% of “tech-savvy” banks outperformed their more traditional competitors by nine percentage points and gained more customers outside their markets, according to FDIC researchers.
Similarly, global consulting firm Genpact found that technology use could cut business loan processing and approval time from 13 days down to 2 days. The most extended delays occurred early in the process, as applicants were slow to submit their paper documents. In addition to requesting documentation earlier, creating auto-reminders to chase documents, along with integrated digital e-signatures and digital technology to improve tracking and transparency with real-time monitoring and alerts drove a more proactive customer experience.
Leverage Tech to Streamline the SBA Loan Process
Commercial lenders must leverage digital transformation technology at every stage of the SBA loan process if they wish to perform to the evolving modern standard. By changing the approach to document collection, loan origination management, and troubleshooting, commercial lenders can speed up and scale their operations without missing a beat.
1. Efficient document collection
Say goodbye to email and say hello to automated document collection. While this is a new concept for many banks, it’s not so hard to imagine bank reps having everything they need in one secure, centralized portal: client contact information, loan application document checklists, email message templates, auto-reminder tools, and a look at what's submitted or outstanding.
When sending document requests to a customer’s email, it’s too easy to get lost in the messy jungle of spam, promotional messages, and personal correspondence. It’s a better customer experience when they can receive document requests through a portal link on their mobile phones. They can take photos and send information in real-time without printing, faxing, or emailing.
2. Leveraging Loan Origination Systems (LOS)
From inception to closing, lenders need a flexible LOS that manages loan origination and fulfillment. New end-to-end systems combine pricing and eligibility information, third-party platforms for document exchange, back-and-forth communication portals, e-signatures, secure cloud document storage, and vendor compliance tracking.
Document automation is a vital component of the LOS that saves lenders a vast amount of time, as employees often lose time hunting down misnamed or filed paperwork. Document collection systems auto-save incoming files in the correct format and bundle them with the customer’s other documents according to rule presets.
3. Increased transparency and proactive troubleshooting
Bottlenecks can arise at various points of the loan application process—for as many reasons as hours in the day. Maybe the loan officer is out of the office for the day or away on leave. Communication may have crossed channels. Scanning, signing, uploading, and resizing attachments add to the delay. A customer may claim to have sent a file that got lost in the system. Stuck loans sit idle in the system without either party being aware. Connecting digital systems can remove entire steps from the process. Additionally, real-time monitoring and auto-alerts ensure that deals are closed at the first sign of opportunity.
Exceptions—affecting more than a third of all loans—cause applications to stall and slide backward in the approval process. Lenders can improve employee training to reduce out-of-process escalations with greater transparency into the common threads affecting the loans.
Swift and Seamless in the Post-PPP Era
For many commercial lenders, the Payment Protection Program provided an opportunity to connect and build relationships with new businesses needing capital. To sustain and continue to scale, lenders will need solutions to address their unique pain points.
Learn how FileInvite helped BayFirst (previously First Home Bank) work smarter, not harder, to scale their SBA loan volume and handle 9,000 additional applications in the first four months of using the document collection system. Similarly, FileInvite cut Fundera’s loan documentation turnaround time from 42 to 15 days. Reach out to our friendly team to accelerate your SBA loan process and position your financial institution as a “people-first” lender.