Blog | Jul 22, 2020

Acceleration Through Adversity: How the Business Loan Experience Advanced During Lockdown

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The need to agree billions of dollars-worth of loans to help businesses retain jobs and survive the COVID-19 lockdown was the final push that banks needed to improve their lending processes. Unlike consumer lending, providing business finance has remained a slow and cumbersome experience. Whether it is Know Your Customer (KYC) and Anti-Money Laundering (AML), eligibility or suitability checking, it all takes far too long.

McKinsey research shows that the time taken by banks to make a decision on a business loan is on average three weeks, and the time to clear funds into a business account can be as long as three months.

With digital first challenger banks emerging at pace, enabling decisions to be made in minutes and time to cash slashed to a matter of hours, it was already becoming clear that the old ways of providing business loans were no longer tenable.

Delivering funds to protect jobs
This progress accelerated fast in an environment where businesses were facing the prospect of falling off a cliff edge if they couldn’t access funds to pay staff as lockdown hit. Across the world, governments introduced schemes to support fast access to funds in the form of business loans.

But the need to provide loans under the Paycheck Protection Program (PPP) in the USA created more challenges than just increasing the speed of paying out loans. Banks also needed to ensure that applications were not fraudulent and that businesses and lenders had clear audit trails to submit to the Small Business Administration (SBA).

In addition, under the terms of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, many PPP loan recipients are eligible for loan forgiveness, enabling them to keep their workforce employed during and after the crisis. Loan forgiveness increases the time recipients have to repay the loan and lets companies defer payroll taxes, introducing even more processes to business lending. And all of this was happening when the daily demand for loans was more than the SBA normally processes in an entire year.

Transformation through automation
Blue Prism teamed up with partners to support the US government’s COVID-19 relief efforts for small businesses by building a solution that uses digital workers to automate process loan applications in a matter of seconds, for same-day approvals.

The solution is being used by several US banks including First Home Bank. Thomas Zernick, President of the bank’s SBA Lending Division said that it had helped to safeguard 85,000 jobs and provide $770 million in loans secured by early June.

He explained: “99 percent of loans are processed on the day of application. We are also using the technology to automate upstream and downstream activities like application validation and loan closures, respectively.”

Building on proven success for the long-term
So how will these rapid improvements introduced during the pandemic translate into “business-as-usual" in the months and years ahead? The key to Blue Prism’s technology is to use digital workers to enact all of the sub-processes involved in considering a loan application and paying out funds to a business account.

This typically begins when a business applies for a loan and inputs the type of organisation it is, along with company name and applicant. The system asks for photographic ID along with a fresh photograph of the applicant.

Once the borrower’s ID and the value of the requested loan are confirmed, the bank’s relationship manager tells the system’s digital workforce to start the credit checking and other due diligence processes including KYC and AML compliance checking.

Instead of managing these background tasks in serial across multiple departments, the system manages them in parallel within minutes, keeping the relationship manager up to speed with progress and saving copies of relevant documents in the application folder.

If there are no red flags raised during this phase, funds can be approved with minimal human intervention and a PDF loan agreement drawn up and populated with relevant information including terms and conditions. This can then be sent to the applicant for a digital signature, whereupon the funds can be released.

The number of digital workers employed by banks to expedite business lending is not constrained by time, space or availability, as human employees are. Nor do digital workers make mistakes or miss vital information that can lead to fraudulent applications being accepted.

The Road Ahead
In the case of business loans, necessity has truly been the mother of invention. Not only have banks helped many businesses secure the funds they needed to keep operating through the crisis, they have shown that a process woefully underpowered in the past can be turbo-charged for the benefit of businesses and banks alike.

For financial institutions, that will mean a higher quality of loan portfolio, lower administration costs and higher conversion rates. For customers, it represents a great customer experience and fast access to much needed funds to protect and grow their business.