Innovating the Commercial Lending Experience
When it comes to commercial lending, the digital revolution’s impact on the finance industry has been somewhat underwhelming. Commercial real estate (CRE) lenders have long been subjected to time-consuming, manual screening of loan applicants, as well as analyzing deal attractiveness and risk. Lenders hire loan underwriters to collect data, analyze the deal, and evaluate the risk. The majority of this process is very manual and time consuming, lasting months in some cases. Founded in 2018, Blooma, a San Diego based startup, aims to automate the commercial lending experience by digitizing aspects of the tasks that lenders currently perform manually and allowing the underwriters to concentrate on the “art” of lending. “Blooma is essentially a digital underwriter for commercial lending that helps lenders create more efficiency in their loan origination and the ongoing post origination loan auditing processes. We take out the manual process, reduce the cost to originate and audit current loans in the loan portfolio, and increase overall efficiency and profitability for the lenders,” says Shayne Skaff, Co-Founder and CEO at Blooma.
Skaff was approached by the founder and chairman of C3bank and ABP Capital, Michael Persall, who wanted to automate his commercial lending businesses. Seeing how manual and tedious the client’s original loan origination process was, Skaff soon realized that their numerous point solutions and methods of analysis, were not on one integrated platform. This led to the creation of Blooma’s AI-driven platform that automates 80% of the underwriting process, resulting ineffective and faster commercial loan underwriting, without the need for lenders to remove and replace existing tools. “Our comprehensive platform brings together those point solutions in a much more efficient way for lenders. We worked with multiple lenders and their underwriters to learn about their respective manual underwriting processes and procedures around auditing their current loan portfolio. We mapped out exactly what they do and by leveraging those insights, we built our software,” states Skaff.
Traditionally, when lenders get a new origination deal or audit a current loan in their loan portfolio, they have to trudge through the evaluation and analysis process, gathering the data needed for cash flow and valuation analysis (both actual and based on market comparables. Additionally, while underwriting or auditing that deal, they need to collect information about the borrower through their bank statements, tax returns, Schedule K-1, and more. This process leads to the decision whether the deal is going to meet the lending criteria for that specific lending institution.
Blooma enables banks to outsource these processes to its AI engines. Blooma automated the extraction of information from existing offer memorandums, rent rolls, and P&L statements and aggregates this data with third party market data to provide information about the local real estate markets, comparables, neighborhood crime statistics, walk score, and any other information that may impact the loan. The platform collects, analyzes, and then complies a complete overview of both assets and borrowers, making the loan underwriting process faster and smarter. This same real-time analysis process offers automated, continuous post origination loan auditing, providing lenders with an early indication of risk. Blooma then refines the data through machine learning and creates a property profile tied to a borrower’s application. The loans are also continuously screened according to the lender’s requirement of the ideal lending profile, all while the platform monitors key deal metrics and automates loan auditing. All of these steps help ensure that the lending portfolio continues to perform at optimal efficiency. Lastly, all this information compiles into a lending profile score which represents the probability that the deal will fit within the lender’s own predefined lending profile. In Summary, the use of AI within Blooma is as an intelligent way to automatically collect and analyze data to help people make better decisions, not to make decisions for them.
Another way where Blooma is unique is that implementation only takes 30-60 days as opposed to existing loan origination systems where implementation could be very costly and last over a year. Blooma can be implemented as a standalone SaaS platform or integrate with the lender’s existing Loan Origination System (LOS). “We do all of our analysis and provide those systems with the proper information for the underwriters and analysts to make decisions. They can look at one hundred deals and actually turn that around in Blooma within minutes and make decisions against those loans based on which ones meet their lending criteria the closest,” says Skaff. The added benefit of Blooma is the fact that the company doesn’t lock these lenders into massive long- term agreements and stays flexible and friendly on the subscription side. Even during the Covid-19 pandemic, Blooma is getting new data on assets all over the country, on a real-time basis. “When we’re connected to a lender’s loan portfolio, Blooma is constantly updating that asset information and telling the lenders how that information impacts the loan in the form of a Blooma score,” explains Skaff.
“Blooma serves as a digital underwriter for commercial lending that helps lenders create more efficiency in their loan origination and underwriting procedures.”
He asserts that unlike the starting days of Covid-19 when commercial banks struggled to keep up with PPP (Paycheck Protection Program), they are now more accustomed to the new normal as new projects are starting to move through. After closing a few commercial deals in July in the wake of the recent developments in the industry towards normalcy, the company aims to put its commercial strategy in place with full effect. Having geared itself up for the future, Blooma plans to continue innovating and adding more functionality to their product on a regular basis. Blooma is also bringing in new talent to its workforce, including biz dev folks and sales leadership. “We are actually building out a new module for Blooma called the portfolio analyzer that gives our lenders the ability to actually analyze their portfolio in ways that are far more effective than today’s manual processes,” says Skaff. The company’s portfolio management analyzes and automates portfolio monitoring and stress testing. It provides the users with a complete overview of their loans and maximizes their lending power with scenario analysis. With this module, the company aims to offer effective visibility to potential events that would improve the profitability of their client’s portfolios. BC