The Case for Automation in Commercial Lending

Why Automation Is Now Critical for Commercial Lenders?

Commercial lending in the US has grown steadily over the past few years, with loan growth hovering around 8–9% and some big banks allocating up to 40% of their lending portfolio to commercial loans. While this is great for overall business growth, it has created intense competition, especially for small and medium-sized (SME) and community banks.

These smaller lenders want to expand into SBA, CRE, and industrial loans, but legacy systems and manual processes make them slow and less competitive. Manual data handling, broken workflows, and siloed applications lead to higher costs, poor customer experience, and compliance risk.

This whitepaper explores how automation can streamline commercial lending, reduce turnaround time (TAT), and improve profitability while allowing banks to continue leveraging their existing IT investments.

The Inefficiency of Manual Processes

Many banks still rely on people-driven workflows for tasks like:

• Gathering and verifying borrower data.
• Creating and circulating credit memorandums.
• Checking adherence to credit policies and compliance manually.
• Managing collaterals and documentation during closing and funding.
• Monitoring loan covenants and tracking exceptions manually.
• Using spreadsheets for underwriting calculations like PD, LGD, and financial ratios.

These outdated methods create long TATs, frequent errors, and compliance blind spots. Often, 50–60% of loan proposals require rework due to missing or inaccurate information.

The Problem of Disjointed Systems

Banks often use multiple disconnected applications to handle different lending tasks origination, underwriting, spreading, documentation, third-party appraisals, and covenant monitoring.

Because these systems don’t talk to each other, relationship managers and underwriters waste time switching between platforms, manually re-entering the same data multiple times. This “swivel-chair” approach leads to:

• Poor visibility into loan status for both customers and internal teams.
• Redundant work and delayed approvals.
• Higher operational cost and compliance risk.

The Regulatory Compliance Challenge

Lending is inherently policy- and rules-driven, but regulations change frequently with economic conditions. Legacy systems can’t keep up with new guidelines or exceptions, forcing banks to balance compliance manually while trying to speed up approval cycles.

This slows growth and exposes banks to non-compliance penalties and financial risk.

How Automation Transforms Commercial Lending?

A modern configurable, unified lending platform brings all the pieces together origination, underwriting, risk management, documentation, and post-disbursement monitoring into a single digital ecosystem.

1. Digitize Documents and Data

• Capture loan requests from any channel (branch, email, online, mobile, third-party).
• Index and store all documents centrally for easy retrieval and audits.
• Auto-generate checklists and key loan documents like CAMs and commitment letters.

2. Streamline Workflows

• Automate movement of loan files between RMs, underwriters, and credit officers.
• Remove manual intervention by routing tasks automatically to the right person at the right time.
• Enable straight-through processing (STP) wherever possible.

3. Integrate Legacy and External Systems

• Create a single application window that connects core banking, CRM, rating bureaus, appraisals, flood checks, OFAC, and more.
• Eliminate repetitive data entry by sharing and pulling information across systems.
• Leverage existing IT investments while adding automation layers.

4. Automate Risk and Compliance

• Build flexible business rules engines to handle policy changes and exceptions without hard-coding.
• Embed real-time risk assessment for promoter, financial, and collateral risk.
• Proactively manage compliance for SOL (Single Obligor Limit), economic criteria, and approval hierarchies.

5. Enhance Monitoring and Collaboration

• Track covenants, exceptions, and renewals with automated alerts before expiry.
• Provide real-time dashboards and visibility for all stakeholders.
• Enable secure, integrated communication with third parties from within the platform.

Business Impact of Lending Automation

Banks using an automation-first approach have reported:

• 50–70% faster loan cycle times by reducing manual handoffs.
• 40–60% fewer errors and rework due to digital checklists and data validation.
• Stronger compliance and audit readiness with automated policy checks.
• Lower operational cost by streamlining systems and eliminating redundant tools.
• Better customer experience with faster approvals and transparent status tracking.

The Newgen Advantage in Lending Automation

Newgen’s Commercial Lending Framework helps banks modernize while protecting existing IT investments. Its capabilities include:

• Unified BPM platform to standardize and automate end-to-end processes.
• Seamless integration with legacy and external systems for a single application window.
• Low-code configurability to adapt quickly to new loan products or regulations.
• Smart content management for secure, auditable document handling.
• Straight-through processing with automated risk and compliance rules.

Banks using Newgen have achieved significant TAT reductions, improved employee productivity, and greater scalability without disrupting core systems.

Why Acting Now Matters?

Fintechs and large banks are winning market share with faster, digital-first lending experiences. Smaller and mid-sized banks risk falling behind if they don’t automate key processes now.

Automation doesn’t require replacing your entire core system with the right platform, you can wrap digital capabilities around your existing technology, modernize incrementally, and remain competitive.

Start Your Commercial Lending Automation Journey

If your lending operations rely on manual processes and disconnected systems, it’s time to simplify, accelerate, and scale with automation.