How to digitize your construction loan process to meet modern borrower expectations
Introduction to digital construction loans and borrower expectations
Construction lending is becoming imperative to the housing market. The lack of housing inventory has been a defining characteristic of the housing market for several years, and August 2018 showed 3.6% fewer homes for sale than the same month last year. Despite the need for new construction and thus more construction loans, lenders are weary of construction lending.
Construction lending is complex, and to the willing lender, the typical method to carry out and implement construction loans require loan managers who have created a manual and in-house solution with a heavy reliance on spreadsheets, memory, and fax machines. Additionally, once this system is dialed in, each loan officer will reach a brandwidth ceiling, halting new loans until one is complete and the loan officer can take on a new client. Or worse, they are overwhelmed and fall behind on deadlines; providing poor customer service.
While this system has “worked” for some, the lenders that plan to grow, scale, and ultimately gain more profit are digitizing their construction lending processes.
Construction loan software enables lenders to efficiently manage every aspect of a construction loan, from pre-closing due diligence to post-closing draw administration. Scalable and flexible, construction loan management software will enable lenders to manage thousands of renovation, construction-only, and construction-to-perm loan types. Digital construction loans are becoming more and more important, as 66% of borrowers are interested in a fully digital process.
What is a digital construction loan process
Simply stated, digitizing construction loans is bringing the entire construction lending process into the digital mortgage space online. Here at Land Gorilla, we have found that prior to using our software, clients were spending an average of two hours to onboard a single loan. With Land Gorilla digital construction loan process, they could do the same work in just 30 seconds, an increase in onboarding speed by 2400 percent.
By freeing up such a substantial amount of time, loan managers can spend more time on other tasks that move the needle: like onboarding more loans.
Speed and scale like this is only available by going digital.
Why is digital construction lending important
There are three main benefits to digitizing construction loans. Going digital will minimize your risk, position you to accelerate and scale, and be able to maximize efficiencies.
Minimize risk: You expose your business to risk when you manage construction loans on spreadsheets. Mistakes are high when using spreadsheets, and they include losing information, inputting data incorrectly, and confusion from multiple users editing the same file. Unfortunately, mistakes like these may result in the over-disbursement of funds and an inability to keep on track with licensing information, insurance, or project documentation.
Switching to loan management software will ensure that the construction loan remains in balance at all times and that draw disbursements are only released when work is completed.
Accelerate and Scale: One of the problems with spreadsheet-based solutions is that they aren’t scalable: the more loans you add, the more time-consuming it is to manage the process and keep data up-to-date and accurate. When maxed out on the number of loans, the daily tasks for admins become reactionary and are constantly “putting out fires”. It’s not long before you reach a tipping point at which the cost in employee-hours required to manage the system far outweighs the cost to upgrade to digital.
Going digital will allow you to manage 350% higher loan volume
Digitizing the process allows for fast growth. Loan admins can now be proactive instead of reactionary in their day-to-day experience. We have found that going digital will allow you to manage 350% higher loan volume than with manual solutions. The average administrator can manage between 35 and 50 loans when using spreadsheets, but with construction loan software that same person is able to manage between 125 and 150 loans!
Maximize efficiency: A spreadsheet-based approach to managing loans is typically created by an individual, who creates the system based on their preferences. It could be a great system, but in most cases isn’t easily scalable. The best system allows for quick onboarding of additional loan administrators and makes it easy for co-workers to cover administrative work if they are on leave. Instead of trying to find papers or understand sticky notes on a desk, everything to administer the loan has been digitized in one easy-to-use system.
Increase your construction loan onboarding speed by 2400 percent
In addition to local in-office efficiencies, digitizing construction loans gives maximum efficiencies for communicating with the various parties involved in each project. Construction draw management software provides a portal that connects everyone involved in the loan.
Great software allows select access to the different parties involved in the project, giving full transparency and visibility where it is needed. By providing access to information you improve the customer experience and reduce the amount of time you’ll spend managing the process.
How to implement a digital construction loan process
Break free of spreadsheet shackles by digitizing construction lending. How? With technology that minimizes risk, allows for faster, more scalable processes, and maximizes efficiency across the construction loan process.
Construction lending has lacked the consistency, controls, and best practices necessary for lenders to drive successful and profitable programs. That ends now.
Backed by decades of construction lending experience, Land Gorilla designed the industry’s leading software to bring control and order to the process. Request a demo today and let’s discuss how to digitize your construction loans.