Check Out The Crucial Steps Of The Loan Origination Process!

commercial loan origination software

Are you planning to apply for a commercial real estate loan to fund your business venture? Have you been looking for suitable loan options and wondering what the loan origination process looks like?

The initial stage of commercial lending services is referred to as the commercial loan origination process. Although the meaning of loan origination is different for every lender, the initial loan origination stages remain the same. The advanced technologies have also led lending companies to adopt commercial loan origination software for streamlined business processes. However, each lender has something unique to offer to their customers, which makes them stand out from the thousands of others. Make yourself ready for the below-listed critical stages of loan origination stages: 

1. Pre-Qualification

The first step of loan origination is the pre-qualification process, where the borrowers receive the list of documents they are required to submit to the lender. These documents primarily include:

  • Address proof
  • Proof of identification
  • Current employment status and information like a salary slip
  • Credit score/report
  • Bank statements
  • Previous loan statements

Once all these document proofs are submitted, they are reviewed by the lender and accordingly, a pre-approval is made.  

2. Loan Application

After the pre-approval of the loan application, the next stage is the loan application. The borrowers are required to complete the paper-based loan application process. However, with the onset of digitization, lending companies are increasingly going paperless and opting for the electronic loan application process. The automated loan decisioning software used for carrying out lending processes accelerates the operations and improves business efficiency. 

3. Application Processing

Once the borrower has successfully applied for the desired loan amount, the credit department receives the application for review. The credit authorities ensure the accuracy, genuineness, and completeness of the application and then approve or disapprove it. The disapproval generally happens when the application is incomplete, or some fields are missing. In this case, the application is returned to the borrower and for completing the missing information and the application is again sent for review. 

4. Loan Underwriting 

Loan underwriting is one of the crucial processes of loan origination in which the lenders mainly check your credibility to pay back the loan amount. Certain crucial aspects are taken into consideration during the loan underwriting process, including credit score and risk scores, to determine how responsible a buyer you have been in the past. The professional loan underwriters also take a look at your business situation to determine whether it is likely to flourish in the near future or not. 

5. Credit Decisioning

Depending on the final decision made by a professional loan underwriter, the loan application is approved or denied. The denial usually happens when loan criteria do not match the eligibility of the borrower or their document proofs are not fulfilled. In addition, even if the loan application is approved despite the flaws in the application, the loan is approved on the revised terms. 

6. Loan Disbursal

Most loan amounts are funded shortly after the final credit decision. However, some specific loan types, likens, Business loans, loans against property, etc., require some additional time for loan disbursal. After the credit decision, the borrowers are expected to wait to hear from the lending companies. 

Make prior arrangements regarding loan documents for a smooth loan origination process!