When you are diligent about eliminating the bottlenecks, your funnel widens and your company becomes more profitable.

Asset-based lending is probably the financial world’s unsung hero. Our borrowers rely on us to lend to what every other lender probably wouldn’t—and be quick about it.

As your lending operation grows, however, do bottlenecks seem to stay the same, building pressure on your team?

As you build your lending operation, be on the watch for internal bottlenecks—bureaucratic or procedural obstacles that slow down the lending process.

Let’s take a deep dive into some of the common bottlenecks at each stage of origination, so you can examine whether they are occurring in your company and do something about them.

Loan Officer Issues

Properly-trained loan officers are equipped to navigate the complex processes involved in originating and pre-underwriting. They also can solve problems quickly with the products and network they have at their disposal.

Remember, your loan officers should be your relationship people. They should be able to thrive on solving investors’ problems with any product you offer. In many cases, growth opportunities arise from identifying the lead, the problem to solve, and how to solve it with the products your company has.

This is especially important when you have a correspondent department or are a pure correspondent lender. There must be soup-to-nuts training on how the product works, is sized and serviced, and how the loan is going to work for the borrower. Your loan officer should be able to explain everything with confidence, alleviating the borrower’s concern and stopping them from looking anywhere else.

Borrowers say they shop for rate, but what real investors shop for is confidence that the loan will close, close fast, and close with no surprises. If you want to widen the funnel so your leads get to closing, train your loan officers every week, schedule pipeline calls multiple times a week to go over cases so the team can solve them, and ensure dedicated senior personnel or management is available to manage issues just for that team.

Nothing kills the growth funnel more than leads that manage to escape the funnel before they get a chance to produce revenue. To keep leads viable and moving through the funnel, make sure your loan officer teams are doing the following:

• Saying no, yes, and how much on a loan within 24 hours of receiving the lead
• Sending terms out within 24 hours
• Effectively communicating (e.g., calls, texts, emails) to the borrower and support staff to ensure efficiency and to manage expectations

Pre-Approval Process Issues

When a lead comes in, it’s important to establish a relationship among the company, loan officer, and borrower immediately. Most of your leads are coming from some sort of marketing or browser search. Borrowers face an endless sea of options and an overwhelming amount of information they may or may not understand.

It’s important, therefore, to solidify the relationship from the beginning. This means conveying, “We are a team.” Once the relationship is established, the borrower stops looking for other options and tries to find out how, as a team, they can work with you to solve their lending problem. If your team can establish this, you can communicate better with the borrower.

In your meetings with origination staff, you may have heard several of these common complaints:

• The borrower isn’t getting us the info.
• The borrower is ghosting us.
• We can’t get them on the phone or to answer emails.

Chances are that your team lost a borrower because another loan officer established a rapport and relationship before your team could. Here are some solutions for getting rid of this bottleneck:

Reach out immediately. As soon as the application or inquiry comes in, the loan origination team must reach out to the borrower via telephone, text, and email stating that the application has been received.

If the borrower answers the call, review all the information on the application. Nine times out of 10, it’s either wrong or incomplete.

If the borrower doesn’t answer the call but answers the text, start the conversation by going over the info to produce terms.

Send term sheets within 24 hours of getting the initial contact email, no matter what information was initially provided. It is up to the origination team to obtain and confirm the initial information they need to produce pre-appraisal terms.

Set expectations and the consequences that will occur if any information changes. For example, loan officers can tell borrowers: “I am going to get you a quote on the information you have provided. If anything changes, it may shift how and if I can do this loan. So, be as specific as possible so I can give you the best idea about what we can do and when. If you like these terms, we will order an appraisal, and that’s when we finalize the amounts on the term sheet. We use a third-party appraiser, so we cannot know what these values will come in at. Be prepared for any shifts in value in the appraisal to show shifts in value on the term sheet.”

Offer a 1:3:1 approach to problems and solutions to your borrower. Here’s how the approach works:

1 – Find out what the borrower’s biggest problem is. As a consumer first, your borrower will talk about points and rates, but those are rarely the issue. The real issues are either closing on time, length of term, prepayment penalties, or something else. Be direct. Come straight out and ask, “What is your biggest concern about closing this loan? Is time, terms, or rate your biggest concern? I need to know so I can provide a solution for that concern.”

3 – Provide three possible solutions to their problem.

1 – State which solution you feel is best to solve their problem.

The Approval

The pre-approval process gears us up for what we need to approve the loan: signed applications to pull credit, do background checks, verify experience, verify access to liquidity, review entity docs, and obtain all the pedigree info on the borrower. This is where we firm up the solution that we came up with in the pre-approval section—the one that would best solve the borrower’s problem.

So, what’s the bottleneck? It is when your team lingers in this area too long. Your operations should have a clear yes, no, and how much mentality—to know when to massage a deal and when to put it out of its misery.

Too many times, as originators, the borrower has not given us certain information yet, but we continue to move forward anyway—only to find that the reason we didn’t get the information is the borrower either doesn’t have it or it’s a failure criterion for the loan. These kinds of deals take the most time, and they fatigue your origination and processing team the most, pulling them away from their other deals as they put out fires on this one.

Follow a firm approval process, and set appropriate expectations for the borrower. For example, “If we do not have this by ‘x’ date at ‘x’ hour, we term this loan at that date.” You either get what you have been asking for or never get it. This approach allows your team to start cutting problem files at the beginning and stop trying to save deals three days from closing.

Paperwork Purgatory

Do these borrowers want this loan?

Most members of your origination team ask this question silently as they request the same operating agreement for the eighth time and still don’t have it. This bottleneck is hard to manage since it’s coming from the borrower. No matter how many times processing or the loan officer team asks for something, it never comes.

So, how do we work with this situation?

Here are some ideas to consider to make the process simpler for your team and your borrower.

In your initial email, include a list of everything needed to finish the file for approval. Ask to schedule time with the borrower to go over the list. Make that scheduled time a video call if you can so you can share screens if necessary. Remember, people tend to do more for people they have met. Meeting on a video call lets you meet face-to-face. Psychologically, this person is now more willing and feels more committed to actually doing what they said they would do.

In follow-up emails, remove items the borrower has already provided. You would be surprised how many loan origination teams just keep sending the same list or a list that still has the item but crossed out or in a different color. It’s too much for the borrower. Adopt the one-swipe rule on emails: If your customer is on their phone and has to swipe more than once to read it, they aren’t going to. Keep your emails tight and focused on what you need and, importantly, when you need it.

Making your ask in text, calls, and email. When you make an ask, the ask has to have a few components: Ask what they need and why they need it. Also, make a specific ask such as “Can I have your bank statements by 3 p.m. today?” If they counter you by saying, for example, “You will have this by 6 p.m.,” if you don’t have it by 6 p.m., reach out at 6:01 and let them know you are looking for it. Or, if they counter with “I can send it after work,” follow up with, “Can I have it by 6 p.m.?”

Be clear about the consequences of not doing what you’re asking: “If we do not get this information today, it may delay your closing. I must get this by 3 p.m. today. If I can’t have it by then, please tell me what time I can have it by.”

Offer a solution, for example, scheduling a time to meet to get all the paperwork done. Most of your investors have regular day jobs; they understand the importance of schedules and deadlines. If your team schedules some time with a problem borrower, you will likely get most, if not all, you need during that meeting.

The Communication Chain

Some of your biggest bottlenecks will involve communications. Misunderstandings, delays in decision-making, ineffective collaboration, and customer dissatisfaction can all arise from poor or disorganized communication. Communication is your time to be Captain Obvious, stating what you understand everyone knows and confirming that they do.

Emails. Include the street name, street number, borrower name, and what the email is about in the subject line. Write your emails with purpose and be direct. The subject line should correspond with a specific action; for example, what you need, when you need it, and the consequence of not receiving it.

Loan file documentation and notes. For every call and text, make a note about what was discussed so your closing team can solve any issue in case you are not there. Follow up every call with an email explaining what you understand and what was discussed. Always ask, “Do I have everything right? Did I miss anything?” This affirms relations and lets everyone know that everyone is on the same page.

A note regarding any internal decisions that were discussed should be placed in the file for the whole team to see so closing can go smoothly. When dealing with brokers or correspondents, send follow-up emails of understanding regularly: “Just to make sure, we have to still provide ‘x,’ and you are OK with ‘y’ that we have sent you? We are still on point to close by ‘z’— is that correct?”

Borrower-specific communications. State clearly the obvious about their loan and closing to them in an email. Remember, you are Captain Obvious. Ask questions such as: “You understand that your spouse has to be there at closing, correct?” “So, we have a 30-year term, on a 5-year pre-payment penalty, at 8.35%, lending $245,000 where you are projected to come out of pocket about $12,000 at closing.”

Technology

Some borrowers are still sending faxes while others are using the latest fintech apps. Bridging the digital divide is like trying to synchronize a room full of clocks—a hilarious challenge.

More bottlenecks with software and systems tend to occur within companies than with the borrowers understanding of it. If your origination staff does not feel confident selling the product and answering basic questions about how things work, your lead pool will turn into a lead puddle.

Let’s face it, there are many places to get capital, and most products are similar with terms, requirements, and so on.

So, why are some lenders the pillar of the investment lending community while others don’t know why they can’t get anything done? They are failing to provide fast and friendly service. A lender that operates with virtually no tech will have a very hard time. Similarly, if you have good tech systems but your team can’t explain why it’s there, how it works and what happens when someone does “x,” they are going to struggle with the borrower.

This is especially prevalent with lender and correspondent lender relations. If you are a lender who looks for leads from other lenders across the country, your explanation, service, and response to your referring lenders must be on point. If your tech operations cannot make it simple for an external lender to know whether their potential loan is a go and for how much within 24 hours, you will struggle to grow your pool of lenders.

Periodically review your platform and see how easy it is to submit a deal, get an answer or terms, and how fast your team solves problems. Be ready to make adjustments. You will see the number of loans grow—and the number of qualified leads that close grow.

Technology was supposed to make it easier to get deals done, communicate effectively, and move faster. Understand that you will be dealing with borrowers and lenders that just don’t know and just don’t understand. Gain their trust and confidence by being an expert using your own technology, and spend time teaching them how to use it. Make videos accessible that address common questions and develop resources you wish you had when you were learning the process.

Because most bottlenecks in lending occur internally, that’s actually a good thing: You have the control to widen your funnel. As your business grows, this wider funnel will narrow again due to the amount of revenue you’re trying to pour through it.

Bottlenecks must constantly be evaluated and attended to so you don’t start losing revenue again. Hopefully, your revenue will keep flowing and challenging your business as you grow. When you encounter those bottlenecks, just come back to these simple points to remind yourself how to resolve the good problem you have: How do we handle this much business?