Lending Software Solution Spotlight: Portfolio Monitoring

Lending Software Solution Spotlight: Portfolio Monitoring

Today’s lending environment has become so quick and efficient with lending software solutions that sometimes it is difficult to keep up with the pace. Now credit and underwriting benchmarks can be built into those lending software solutions so the good people in credit barely need to analyze a request before its closed and on the books. With lending seeming to go at warp speed, how do we get in front of the credits that may have slipped through? The ones that maybe were a little on the border or even the ones that start to go the wrong way on the risk rating scale means that the monitoring of an institution’s portfolio becomes even more important. The only way to keep up is with good portfolio monitoring and a system that works in conjunction with your lending software solution. It can be the key player helping your staff get ahead of problems, maybe before they even become problems.

We are all familiar with various underwriting standards that are evaluated to approve credit. Of course, we need to analyze cash flow coverage ratios and debt burdens associated with a credit request. We also incorporate these into our loan agreements to define future performance, covenants, we are all familiar. While these tried-and-true ways of monitoring performance have been beneficial for years, each is monitoring the past. A lending software solution for today’s lending environment should be able to help direct Institutions to credit relationships that are becoming the most vulnerable and threating and that may need immediate attention.

In order to get ahead of problem loans, a lending software solution needs to look at behaviors. The current state of lending has afforded Institutions better access to information. We no longer need to wait for companies and individuals to submit financial information to test against covenants that were agreed upon when loans were originated. Credit agency reporting has become more consistent, and scores of individuals and companies are more current then ever before. Following and documenting those reported fluctuations in a customer’s behavior can be an indication of loan performance in the future. How borrowers are handling their deposit relationships can be an indication. If balances have significantly decreased that may be a sign cash flow is getting constrained. Possibly the institution has started to see customers overdraft those deposit accounts. What if revolving lines of credit have stopped revolving and balances remain high?  Don’t forget about delinquencies and clients stretching out their payment cycle, but we’re trying to stay ahead of that. All can be indications that there is something happening that the institution has not been made aware.

All these indicators can be checked every day within your lending software solution. Rules designed to “listen in” on activities can be run in the background to determine if an account needs a little more attention. All those triggers can be assigned to specific staff in order to contact clients to determine what is affecting the business. Portfolio monitoring is about getting ahead of issues and having a plan to minimize the risk those pose to the portfolio and institution overall. It empowers Portfolio Managers by showing them what may be lurking and the reason to track down what has become the riskiest part of their portfolios in their lending software solution on a daily basis.

Managing risk is the most important factor in lending. Assessment and monitoring risk is a constant process.  With consistent information, it can prove beneficial to any institution. A Portfolio Monitoring system that works with your lending software solution will help your institution proactively manage risk and help identify what risk is growing in your portfolio.

Baker Hill has been providing innovative lending software solutions and expert guidance to banks and credit unions for over 35 years. Built by bankers for bankers, we know the importance of automating manual processes like portfolio monitoring. If you’re interested in more ways to implement digital portfolio monitoring processes within your lending software solution, read our feature sheet to learn more.

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