To Maximize Growth, Avoid These MBL Inefficiency Sources

Small businesses are among the most valuable members for credit unions. However, credit unions oftentimes process member business loans the same way they would process large commercial loans, resulting in MBL inefficiencies. These inefficiencies not only reduce profit margins in the portfolio – they can also negatively impact the member experience.

As interest rates continue rising, overly complicated MBL processes can make it difficult for credit unions to grow their portfolios, leading them to either spend additional marketing dollars to attract more prospective borrowers or loosen underwriting criteria to approve a larger number of existing applicants. Additionally, a credit union’s lack of efficiency means that small businesses, even those with adequate credit history, will have to wait several days for a credit decision.

Eliminating sources of inefficiencies will prove beneficial to credit union employees and small business members, as well as the credit union’s bottom line. To improve MBL processes, credit unions should be wary of probable sources of inefficiencies, including:

1.  Duplicate Data Entry Across Multiple Systems

Technology has the ability to improve your approach to MBL, but can also hinder it. Without a solid workflow in place, you can have an inconsistent, expensive and risky loan origination process. Simplifying the loan application process and using autofill technology, which minimizes data entry for members by automatically pulling existing information from the credit union’s core system, will save both members and employees time. This also mitigates the risk of manual error from inputting the wrong information.

Beyond the loan application, minimizing duplicate data entry, integrating data across platforms and making data easier for credit union employees to access supports more efficient underwriting and decisioning of member business loans. Instead of spending time tracking down the right data, employees should be able to apply analytics to multiple data sources to quickly evaluate the creditworthiness of a small business.

Some credit unions may even opt to eliminate all manual aspects of underwriting by adopting a fully automated decisioning model for member business loans under a certain dollar amount. Lastly, credit unions can eliminate double and sometimes triple data entry by automating the booking of member business loans to their core system, which allows staff to focus their efforts elsewhere.

2.  Repeat Follow-Ups With Members to Collect Supporting Documents

Following up with business members can result in a lot of wasted time in back-and-forth phone calls and emails. These members are often busy taking care of business matters too, so pausing their day to locate and send additional information to a loan officer within normal business hours can be inconvenient, if not impossible. Offering a digital member-facing portal will allow members to review requests for supporting documentation, upload any additional information and check on the status of their loan application – all on their own time. This reduces the time employees spend following up with members while increasing transparency in the MBL process and enhancing the member’s trust in the credit union.

3.  Finding a Specific Loan Officer to Understand the Status of a Loan Request

Leveraging technology that facilitates the access and sharing of loan applications between branch networks, or directly to members through online banking, makes it easier for employees within the credit department to collaborate. Rather than waiting on a specific loan officer to assist a business member, this means credit unions can empower several employees to understand the status of each credit request and best serve the member’s needs in a timely manner.

4.  Re-Spreading Financials for Annual Reviews

MBL inefficiencies are not limited to the origination process, monitoring for risk in the portfolio can be streamlined as well. Re-spreading financial statements for annual reviews often involves tracking down data in Excel spreadsheets and other various documents, and then manually calculating how the portfolio is performing. This makes it difficult to identify vulnerabilities within the MBL portfolio and take measures to protect these valuable loans, but fortunately, existing technology makes it possible to gain a holistic view of the portfolio to quickly address problem credits.

Such technology also helps credit unions identify new opportunities in the portfolio. Proactive, data-driven portfolio monitoring and more efficient statement spreading enable employees to detect when a business member may need a different product or new service. For example, a small business’ growth may signal its potential appetite for a new loan and by recognizing that, the credit union can increase wallet share and further strengthen that member relationship.

Highly efficient processes and an outstanding borrower experience are deciding factors of a credit union’s success in the MBL market. Steering clear of the aforementioned efficiency traps will ensure your credit union is positioned for profitable and sustained growth, both in its MBL portfolio and its bottom line.

Mike Horrocks is Vice President of Product Management for Baker Hill. He can be reached at mike.horrocks@bakerhill.com.