Construction Loan Programs | Construction Loan Software | How to scale construction loan program

Here at Land Gorilla we have observed a few things about lenders who provide construction loans. We learn a lot from our customers and the needs of construction lenders.

Is this your experience?

This is what we hear: Lenders begin a construction loan program, build their connections with contractors and the community, and take on more and more loans. The loan officer gets really good at construction lending but soon runs out of bandwidth. They can only manage between 30-40 loans. Business is good, relationships with contractors are good, so the bank makes the case to hire another loan officer. Soon it becomes apparent that each loan officer can only manage a finite set of construction loans at one time, severely limiting their ability to grow.

As it turns out, a new study recently reported that loan volume is the number one concern in 2019 for bank CEOs, and mortgage lenders say construction loans are the most promising product, according to a different study.

With the industry focus on volume and construction loans, we are sharing our top tips on how to scale construction loan programs to increase that loan volume, do more with your current headcount, and even attract and retain top talent.

The loan officers in the story above actually have the capacity to take on many more loans, if only they had different tools at their disposal. This situation is common when loan officers are using spreadsheets instead of construction management software.

Below we have two tips to scale your construction loans:

The first tip to scale construction loan programs is to go digital

When scaling construction loans there is one big thing holding lenders back: spreadsheets. It’s frightening to know that 88% of spreadsheet documents contain one or more errors, and it’s not uncommon to hear that a few errors have cost financial institutions over time. Digitizing these fields keep the transfer of data much more accurate and pure, especially as fields have to be copied over and over again for mortgage documents. Accuracy and visibility are key with financial documents, and when lenders rely on paper or spreadsheets, accuracy is jeopardized and visibility is almost non-existent.

Regarding visibility, going digital allows key project stakeholders an accurate view of the current project and their responsibilities within it. Borrowers, contractors, and lenders all need to have an understanding of the project, and going digital is the path forward. Going digital should provide them with their own login with the right permissions and visibility into the project that’s pertinent to them.

If lenders want to take on more construction loans they need each loan to move along smoothly and to catch any potential problems before they happen. Inefficient monitoring and problems buried deep in a spreadsheet cause more wasted time and money at the expense of the lender. Going digital allows lenders to more accurately monitor, keep track of, and see warning signs early and clearly.

This visibility and ease across the entire loan pipeline is a major benefit to loan originators who are looking to work at companies with streamlined, effective processes. Construction loan software is a major draw to attract and retain top talent. It also makes onboarding a new employee or loan much faster, which provides a great experience for everyone involved.

And one last thing about how to scale construction loan programs by going digital. Consider the amount of time required for accurate reporting with spreadsheets. Old-fashioned manual reporting is a major time suck, but when you digitize the process, reporting becomes quick, accurate, and hassle-free.

Yes, digital software is the way of the future but it actually goes deeper than simply adopting some software. There is actually another concept to consider when going digital, and that is the place where your software is hosted.

The second tip for scaling construction loan programs is to know the benefits of Software as a Service (SaaS)

Almost every new technology you encounter is Software as a Service (SaaS). It has become very prevalent. Instead of investing in software that is hosted locally on your computer, SaaS is hosted off-site in the cloud and accessible via an internet connection with a web browser on any device. And thus lies one of the greatest benefits of SaaS for lenders: You don’t have to be on “the special” computer in order to use the program. You only need a log-in and a browser to access the data from all of your construction loans in one place.

Because the software is a service, that means the service provider is in charge of security and compliance as it pertains to the data they host — an amazing benefit to the lender. For example, Land Gorilla’s data center is ISO 27001 and AICPA SOC 2 certified which outlines and follows all the security standards.

In addition, users of SaaS receive every update, every time, to keep their software as the most up-to-date version as possible. On-premise solutions immediately start to age as soon as they are installed. SaaS software providers are constantly updating their software, fixing bugs, and introducing new features and functions which can be pushed out to every single user on the software at the same time. This means no more upgrading to the newest version with time, money, headaches, and disappointment. This also means the lender doesn’t need a dedicated IT staff just to maintain technology. Instead, the service provider does it for you.

Another benefit of SaaS is the low upfront cost. Subscription services mean the cost is paid out over time, while the on-premise version requires a hefty up-front cost, and then additional installation and upgrade fees.

When it comes to scaling use of the software, it’s simple: request another seat. For on-premise software, scaling users is not nearly as easy. In worst case scenarios, you have to go through another installation process with the on-premise software just to get another user.

Digitizing construction lending is best when the root is based in the cloud as a software as a service.

Scaling construction loan programs for 2019 comes down to digitizing the process and making sure the software is hosted in the cloud.

Construction and renovation loan program marketing

As a bonus to help scale your programs, we have a few ideas on how to market to potential borrowers. Increasing loan inventory is an important focus for many lenders this year, and construction and renovation loan programs can be a key player to reach this goal.

Is new construction gaining momentum in your community? Or are you seeing more aging homes and a higher need for renovation loans? Perhaps your community is experiencing the 90% of Baby Boomers who are looking to make improvements to their current homes, with a particular focus on bathroom renovation. Anticipate the needs in your community, ride the wave of what is trending, and create specific messaging around the loan programs you support.

Popular marketing methods include ads on your homepage or app, media placements, and newsletters. Perhaps the most effective is networking with your builders to gain referrals. In order to gain great referrals, you need to have a construction loan management process that is helpful to builders as well as your borrowers. That all goes back to digitizing the process.

For more ways digital wins, check out this playbook where the manual and digital draw process go head to head:

Construction Loan Draw Process | Construction Lending | Construction Loan Programs