An increasing demand for short-term working capital finance is being driven by the current economic recovery and expansion in the United States. SMEs are seeking financing to manage their cash flow and support growth, and lenders should be prepared to meet this need.
If 2020 has taught us anything, it is that “we can’t predict the future.” Who would have thought that a year that started with wildfires in Australia would end with a global pandemic? Community banks and credit unions saw massive demand on their loan departments. Between record-low mortgage interest rates and PPP loans, requests for loans were at an all-time high. And just as lenders might begin to take a breath at the end of the year, another round of PPP funding was signed into law. The end of one year is always filled with predictions for the next. After
Many community financial institutions found themselves very busy in 2020. Between low mortgage rates and PPP loans, there was a surge in activity. Banks that had a streamlined underwriting and credit approval process found themselves able to manage the increase in loan requests. Others found themselves struggling to meet customer demands. If your bank or credit union was in the latter group, you probably wanted to understand where the bottlenecks were occurring. Finding the parts of the process that are taking too long are key for solving the problem going forward. Outlining the Stages of the Loan Approval Process The
It is easier to understand collateral value when your collateral is something like real estate. You receive an appraisal and calculate your loan-to-value. When your loan is secured by business assets, this becomes a little more complicated. Accounts receivable, inventory, and equipment can fluctuate in value. This makes it harder to determine whether or not your loan is fully secured. You should perform detailed collateral analysis as your borrowers’ request new loans, renew their lines of credit, or begin to fall behind on payments. Knowing the strength of your collateral is key to understanding your risk of loss. Loan Policy
While originating new loans may be a key area of focus for your community bank or credit union, renewing existing loans can absorb a significant amount of time. Many of the requirements are similar to new loans, and if you are not prepared, the renewal process can become frustrating and disjointed. By having a streamlined process, you can collect what you need from your borrowers, get the necessary approvals, and get the loans closed for your business line of credit renewals. Reviewing a Line of Credit for Renewal Essentially, you want no surprises in the renewal process – either
Every day in the world of community banking is different. Loans are in various stages of the process: application, underwriting, waiting on a third party, needing loan approval, preparing loan documents. For staff that work on these loans, it is a daily question: What should I do first? Fortunately, workflow automation can help to answer some of those questions. Different tools are available that can speed up the time in each phase of the loan process. You can remove the guesswork so staff can instead focus on completing the tasks. How Can Workflow Automation Be Leveraged? A McKinsey study
Community financial institutions can alleviate the burden of ongoing exception management by ensuring that a solution is in place that properly categorizes exceptions. Reporting then becomes more meaningful in assessing portfolio risk.
With PPP business stimulus ending, commercial loan and commercial real estate default rates are starting to increase and could dramatically impact your 2021 profitability.
On June 23, 2020 per FIL-64-2020, Interagency guidance for assessing safety and soundness was issued. This guidance outlines how examiners should respond to Covid-19 when evaluating financial institutions. Per this guidance, examiners will take into account the stresses caused by Covid-19 and to exercise flexibility in their supervisory response. However… Examiners will continue assess an institution’s compliance with existing policies and procedures. Emphasis will be placed on their risk management systems and the ability to identify, monitor and control risk. Examiners will also review if appropriate actions are being taken in response to stresses caused by Covid-19 impacts. The implication
Comprehensive credit risk management solution
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