How to digitize your construction loan management process to meet modern 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. Construction lending has lacked the consistency, controls, and best practices necessary for lenders to drive successful and profitable programs. The typical method for managing construction loans is a manual or in-house ‘proprietary’ solution that relies heavily on spreadsheets, personal memory, and lots of email correspondence. Additionally, once this system is dialed in, each loan officer will quickly reach their bandwidth, impacting new loans from being closed. Or worse, they are overwhelmed and fall behind on deadlines; providing poor customer experience.
While this system has “worked” for some, going digital is even more important today as 66% of borrowers are interested in a fully digital mortgage process. If you plan to grow, scale, and ultimately gain more profit from your construction business, then digitizing your construction lending processes is paramount to your success.
What is a digital construction lending process
Simply stated, digitizing construction loans is bringing the entire construction lending process into the digital mortgage space online. Prior to using our digital solution, our clients were spending an average of two hours to onboard a single construction loan. With Land Gorilla digital construction lending process, our clients 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 grow the bottom line, 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 a digital construction loan process. 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 your entire construction loan management process allows for faster growth. Loan administrators can 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 draw management 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 with confidence!
Maximize efficiency: Using spreadsheets to manage construction loans is typically created by an individual, who creates the system based on their own preferences. It could be a good short term solution, in most cases, thought it is not scalable or cost effective to maintain. 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 in-house operational 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.
Digital Draw Management or Construction Loan Manager Software?
Draw management is an essential part of the construction loan management process. However, digital draw management is only one part of the construction loan machine.
A Construction Loan Manager (CLM) software is a cloud-based, digital solution that manages every aspect of a construction loan, not just the draws. That includes pre-closing due diligence, post-closing draw administration, and through project completion. Scalable and flexible, Construction Loan Manager software will empower you to efficiently manage all renovation, construction-only, and construction-to-perm loan types. Implementing a CLM will give you a fully digital construction loan process.
How to implement a digital construction lending process
Construction lending has lacked the consistency, controls, and best practices necessary for lenders to drive successful and profitable programs. That ends now.
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 entire construction loan process.
Backed by decades of construction lending experience, Land Gorilla designed the industry’s leading software to bring control and order to the process. When implementing a digital solution, make sure it is designed for rapid deployment, requiring simple configurations rather than customized workflows that are known to cause major delays. The implementation process should take 4 weeks or less and must include:
- Implementation Plan
- Account Setup & Configuration
- Software Training
- Loan Onboarding
- Final Training & Launch
Are you ready to implement a Construction Loan Manager software? Request a demo and get started digitizing your construction loans today.