Loan File Routing
In the past, loan file routing involved moving hard copy records between offices, branches, and third parties (such as auditors or examiners). However, thanks to advancements in technology, financial institutions are reducing their reliance on paper-based workflows and realizing new efficiencies.
Why Financial Institutions Route Loan Files
Paper loan files can only be in one location at a time, which is why routing becomes necessary. Example use cases include:
- Assisting commercial borrowers, such as when a small business owner applies for a loan at a location other than where loan files are kept.
- Preparing for audits and exams, such as when an auditor requests to review one or more of the institution’s loan files.
- Renewing a line of credit, such as when a commercial customer requests additional funds to cover rising payroll expenses.
- Managing loan participations, such as when a bank distributes updated documentation to downstream participating institutions.
Challenges of Paper-Based Loan File Routing
Moving paper loan files from one place to another poses numerous risks for financial institutions, including:
- Information loss: Paper loan files can be misplaced, damaged, or destroyed.
- Transportation costs: Couriers and postage expenses negatively impact an institution’s bottom line performance.
- Duplication of files: “Shadow files”—digital copies of hard copy documents—create confusion for staff and pose operational challenges.
- Inefficient processes: Waiting for loan files to physically arrive inhibits a lender’s ability to support customers or members.
Using Technology to Reduce Manual Routing
Digitizing a financial institution’s loan documents can be an effective first step for reducing routing of paper. In addition, implementing a document management system that’s built for commercial lending teams can drive further efficiency. For example, AccuAccount from Alogent was built to “look like” a traditional loan file. Borrower information appears at the top of the page, credit information is on the left, and loan and account information is on the right. Providing convenient electronic access to borrower information reduces or, in some cases, eliminates the need to route hard copy files. Multiple users can access the same digital file simultaneously, accelerating efficiency and, ultimately, enhancing the borrower experience.
Browse Innovation Hub for free resources or explore Alogent’s loan document management solution, AccuAccount.
