All-Time Spike in Commercial Lending: Minimise Your Risk and Ensure Profitable Lending

Commercial lending firms are bracing themselves for an increase in bad debt as the fallout from Covid-19 continues apace. In this blog we explore how lenders can minimise their risk and navigate their way to more profitable lending.

Posted on August 9, 2020
Written by Rishi Kathuria

commercial lending

The economic fallout from the coronavirus is unprecedented and is set to continue as the pandemic shows no sign of disappearing at the rate at which it arrived.

It is widely forecasted that the UK economy is heading for a recession which is predicted to be deeper than the 2009 financial crisis. However, until the various support measures instigated by the government are gradually withdrawn, the full extent of the damage won’t become clear.

Lenders should transform now to deliver spike in demand

It is predicted that Commercial Lending is set to soar for the last quarter of 2020 and into 2021 as government support is withdrawn and companies continue to suffer from poor sales and minimal revenue generation. Compounded with the requirement to commence repayment of the Government-backed loans in the first half of 2021, there will be an increase in demand for Commercial Lending. 

Whilst lenders would rather the Government be liable for the loans, the various support schemes currently in place provide minimal value to Commercial Lenders.  But this is set to change with the predicted requirement of new commercial loans as lenders will set their own rates and terms, thus creating a far greater opportunity for profitable lending.

Unprecedented volatility translates to significant risk

The downside will come in identifying which companies to grant loans to. Risk management and KYC will be critical to safeguarding the lenders exposure. Applications may come from companies, directors or beneficial owners that have committed fraud, either through existing methods or through the new easy to obtain Business Bounce Back Loans or CBILS.

Incorrect use of the furlough scheme could start to unravel. Stringent automated checks for PEPs/Sanctions/Adverse Media can provide a foundation for a strengthened digital lending platform.

Digital verification for Commercial Lending

A prudent approach to risk can be taken and vigilance will be key. Commercial lenders will need to lean on digital infrastructure that has been deployed through a trusted technology partner. In a rapidly changing market, Commercial Lenders will need to stay ahead of the curve, by developing swift onboarding processes. Automation will be critical to improving speed of turnaround as the volume of lending applications is set to rise. Manual processes will be too cumbersome to manage, with longer delivery time from application to disbursement. By implementing a digital verification solution, time to revenue can be reduced with the ability to achieve improved customer satisfaction.

End-to-end digital platforms

Whilst risk is best managed at the point of onboarding, complete transparency is required for the entire lifecycle of the loan. An end-to-end automated process can be delivered by partnering with NorthRow to ensure a compliant, efficient and great customer experience, for onboarding, through to monitoring and delivery of any necessary remediation. Armed with a digital solution Commercial Lenders will be in a stronger position to manage the multiple applications and ongoing impacts of COVID-19 lending requirements that are predicted for the years ahead.

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Digital onboarding for Commercial Lending

Commercial Lenders that have already adopted digital onboarding processes have seen how important it is to process applications at the speed and scale required. During the pandemic they have benefited from swift onboarding that meets compliance regulations, the dream of every MLRO. 

Changing your customers’ journey is key to staying ahead of your competitors in the Commercial Lending marketplace. Your customers want a smooth onboarding process which you can only achieve if you have real-time access to the data you need to better manage the increase in applications that are forecast.

Whilst an MLRO has the driver of compliance and managing the regulatory requirements, sales and customer service teams also benefit from digital onboarding and ongoing monitoring. Lenders need to evaluate customers and accept their applications in an instant, and at any time of the day. It means giving them the superior customer experience they’re expecting, while making sure they’re whiter than white on compliance and verification. 

NorthRow is a leading exponent of these technologies and can provide cost-efficient solutions for swift risk assessment and remote verification, along with ongoing monitoring and remediation, whilst providing the audit trail and proof that is so important to Compliance teams in regulated companies.