Revamp Your CRE Lending: Streamline Commercial Loan Underwriting with Blooma

It’s no newsflash that the traditional commercial loan underwriting process is slow, manual, and complicated. Lenders have to consider borrower credit, property appraisal, cash flow, and market conditions before making a decision. This lengthy process delays loan approval and frustrates lenders and borrowers alike.

A streamlined approach, on the other hand, is key to faster underwriting without sacrificing thoroughness. 

This is where Blooma comes in, providing a solution that uses automation and AI insights so lenders can make quicker, data-driven decisions in the commercial lending space.

In this post, we will look at how Blooma revolutionizes the commercial loan underwriting process, so lenders can streamline workflows, reduce risk, and make better loan decisions faster.

Understanding the Commercial Loan Underwriting Process

Underwriting is the process by which lenders assess the risk of a loan by evaluating the borrower’s creditworthiness, the property value, and overall market conditions. In commercial real estate (CRE) underwriting, this is more complicated due to the size of the loans, the different types of loans available, different property types, and overall market volatility.

Terms often used in underwriting that are worth knowing include:

• Due Diligence: A thorough review of the borrower’s financial history, property appraisal, and other key documents to ensure the deal is viable.
• Risk Assessment: The potential risks associated with the borrower’s ability to repay the loan, including credit score, LTV, and DSCR.
• Loan-to-Value Ratio (LTV): A calculation of the business loan amount to the property value. This affects interest rates and loan terms.
• Debt Service Coverage Ratio (DSCR): A measure of the property’s cash flow versus debt obligations. It’s used to determine if the borrower can service the loan.

The commercial real estate underwriting process involves the following steps that you should know:

1. Loan Application: This is the first stage where borrowers submit financials, tax returns and business plans, credit history, income, and loan requests.
2. Initial Review and Pre-Approval: Lenders review the borrower’s credit score, cash flow, and market conditions to see if they qualify for pre-approval.
3. Property Appraisal: This involves a professional appraisal of the commercial property to ensure the loan amount matches the value of the property.
4. Risk Assessment: Lenders review the borrower’s creditworthiness, LTV, DSCR, and market trends to ensure the loan is low risk.
5. Due Diligence: A deeper dive is conducted into the borrower’s financials, property’s net operating income (NOI), and other factors to verify the loan application.
6. Loan Approval: Once all data is reviewed, lenders make a final informed decision based on their risk tolerance and offer loan terms, interest rates, and repayment periods.
7. Closing and Disbursement: After the loan approval process ends, the loan agreement is signed and the funds are disbursed to the borrower.

Challenges Faced in Traditional Underwriting

Traditional underwriting has many challenges that slow down the lending process and can increase the chance of errors for both lenders and borrowers. 

Some of the biggest pain points are:

1. Manual Tasks: Traditional underwriting is all about manual data collection, document review, and financial analysis. Lenders have to sift through spreadsheets, tax returns, and borrower documents which can be a long and painful process.
2. Time-Consuming: The volume of paperwork and the back and forth between lenders, borrowers and third parties (appraisers and auditors) extends the underwriting timeline. This can delay loan approvals and make lenders less competitive in a fast market.
3. Data Errors and Inconsistencies: Manually inputting and reviewing data increases the risk of human error whether it’s miscalculations or overlooked details. Inaccurate data can lead to bad decisions and lenders can’t properly assess creditworthiness and loan to value (LTV).
4. No Real-Time Insights: Traditional underwriting doesn’t incorporate real-time market data. Without up-to-date information on market conditions, interest rates, or property values, lenders are making decisions based on outdated or incomplete data and that affects the overall risk assessment.
5. Inconsistent Risk Assessment: The risk assessment process varies greatly between lenders or even within the same institution. Without standardization, two loans with similar profiles can have different terms or decisions and that’s inconsistency and market misalignment.

These challenges slow down the underwriting process and make it inefficient and error-prone. 

Lenders who struggle with these inefficiencies will miss out on good lending opportunities or take on riskier loans and that will harm their portfolio. 

Pro-Tip: Learn how you can streamline these workflows with technology like Blooma to improve speed and accuracy.

How Blooma Streamlines the Process

Blooma’s platform uses advanced AI technology to address the inefficiencies and pain points of traditional commercial loan underwriting. 

By automating the process and providing real-time data, Blooma enables lenders to make faster, better decisions with more accuracy. 

Here’s how Blooma works for CRE.

Automated Data Collection and Analysis
Blooma eliminates manual data entry by automating the collection of borrower information, credit reports, tax returns, and financial statements. The platform’s AI engine scans and categorizes the data fast, reduces human error, and ensures accuracy in cash flow, creditworthiness, and debt service coverage ratio (DSCR).

Real-Time Market Data Integration
One of Blooma’s key features is providing real-time market data. Lenders get instant access to up-to-date information on interest rates, cap rates, and property values, so they can make more accurate risk assessment and align with market trends. This reduces the risk of making decisions based on outdated data and allows the lender to react to market changes.

Predictive Analytics and Risk Modeling
Blooma uses its AI engine to predict the future performance of a commercial property. By analyzing historical data, credit history, and market trends, Blooma’s predictive modeling tools give you insight into potential risks so you can make more informed loan decisions. This means more accurate risk assessments and consistency across all loans.

Seamless Workflow Automation
From loan application to loan approval, Blooma automates every step of the underwriting process. By removing manual tasks, lenders get faster turnaround times and can close loans quicker. With less time spent on repetitive tasks, underwriting teams can focus on the more complex deals and building relationships with clients.

AI-backed Decision Making
Blooma’s platform gives you AI driven insights based on a wide range of data points – LTV, NOI, borrower credit scores, and more. This means more data-driven decisions and less approval based on incomplete or incorrect information. You can be confident if a loan fits your portfolio’s risk appetite.

Reduced Turnaround Time
By removing the bottlenecks in the loan underwriting process, Blooma reduces the time from application to decision. The platform’s workflows are streamlined so you can approve faster, and be more competitive in the market. This is a huge benefit for complex commercial real estate loans where speed is often the deciding factor.

Wondering how this translates to benefits for you?

• Higher Accuracy: Automated data and real-time insights eliminate errors and ensure all information is considered.
• Faster Processing Times: Automate manual tasks and close deals faster with Blooma.
• Better Managed Risk: Predictive analytics helps you identify risks before finalizing a loan, leading to stronger portfolios.
• Highly Competitive: Lenders with faster processing times and real-time insights are more competitive in the commercial real estate market, gaining an additional edge.

Elevate Your CRE Lending with Blooma

Blooma is changing the way commercial loan underwriting works, giving lenders the power they need to be more efficient, accurate, and prompt in their decision making. From automated data collection and real-time market insights to advanced risk assessment models, Blooma is transforming the traditional underwriting process so you can close deals faster and minimize risk.

Whether you’re managing complex commercial real estate loans or looking to streamline your day-to-day operations, Blooma’s features will keep you competitive and ready for the changing CRE lending landscape.

Book a demo and see how Blooma can help you with your CRE lending and achieve your business objectives.

Start with Blooma today!󠁧󠁢󠁳󠁣󠁴󠁿