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Loan Processing
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Loan Processing :
When a person submits his business loan application, it may seem like it disappears into a black hole. But understanding how the commercial loan processing system works can help reduce his eagerness while he waits for sanction.
Some lenders prefer to pre qualify likely borrowers to determine how much they can afford. This will also give him and his lender and opportunity to see which loan program would be most suitable for his needs. The lender will collect basic information such as applicants income and existing debts. To commence the loan process, applicant must complete and submit a loan application. Once applicants application is received, a loan officer or processor will evaluate applicants credit reports, the amount of available security and applicants income. Applicants loan officer will decide if any additional documentation is required, such as personal financial statements. If applicant is purchasing real estate then he may also need to present beginning environmental reports, area maps, title reports, property appraisals and lease details. If he is going through a broker, then the broker will package his loan request and propose it to several lenders for approval. When applicants commercial loan package is submitted to the decision makers -- either a loan agency or sponsor -- the processor will present applicant with a letter of intent or term sheet. A letter of intent or term sheet is a formal document intended to ensure all parties involved i.e. the lender and applicant are on the same side. The letter of intent may include the names of involved parties, amount of financing, type of security (guarantee) and other main terms. Decisions are generally made in one to five days. During the underwriting practice, applicant may require to supply additional documentation. In case the applicant is using a brokers services then he or she should be helping him to negotiate the best terms, fees and conditions from various lenders. The next stair is choosing the most attractive proposal and signing and returning the final letter of intent along with a check if required.
When all third party information is successfully completed and underwriting conditions are satisfied, the final loan package is resubmitted to the loan committee for final sanction. At this point the lender will issue a final full loan commitment. When applicants loan is sanctioned, his closing agent, who may be an attorney, a company or escrow company representative, will receive closing documents. His closing agent will record or file deed transfers and mortgages, order title insurance, coordinate the exchange of funds, and arrange for him to sign the loan documents. Closing can take place within days of sanction. At the end, the lender funds the loan with a cashiers check, draft, or electronic wire transfer. Whether one applying for a business loan, normally some mistakes happen that may be as follows: 1. When one applies for a loan, he must know his creditworthiness. One should get copies of his credit scores from the three major credit bureaus. 2. One should collect all the required information about the whole process. 3. One should keep record of the interest rates and click at the right rate. Frequently, people make the mistake of waiting for interest rates to drop farther. 4. One should show in the application the requirement of loan. As lenders want to look into it that what ones needs are 5. One should keep good record of his business as Lenders want to see stability in how one do business and with whom. 6. Applicant should investigate that who is the best lender in the market and after that he should apply to the same. 7. One should apply with all financial updates so that no further problems can arise. 8. Not unlike a down payment when buying a home, having some equity in a business project significantly enhances his chances of securing a business loan. If one is not invested in the project, or in the business itself, the lender will be less enthusiastic about taking on such a risk. 9. One need to provide some security, should there be a default in payment. 10. If one is starting a business, you need to show how the business will operate and make money. A business plan is essential for a lender to see ones objectives and specifically, how one intends to reach them. One must take in all applicable supporting data, including financials.
The loan processing industry has grown so rapidly in the past few years, that lending institutions are fighting to keep up with the paperwork. Nowadays, there are some software emerge by which they eliminate the paper headaches from the mortgage loan process and streamline the business process to generate cost and time savings!
Mortgage files, in any organization, flow in a linear fashion where the file moves from point A to B to C. By incorporating that software imaging solution at the beginning of the process, organizations will improve loan processing times by revolving the linear process into a virtual process. The elasticity of a virtual process allows employees to work on any part of the loan process at any time, increasing efficiency and reducing costs.
This is the new way of loan processing system as now manual loan processing way is coming to an end. Nowadays this above mechanism is followed by most of the lending institutions to process the loan applications to make their work smooth and to get the work in shortest possible time.
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