In simple words, a business loan underwriting process is a step that comes between applying for the loan and receiving the loan money. Once you have collected all your fiscal documents and applied for a small business loan, then the luck for your financing lies in the hands of the underwriter. In other words, a Business Loan Underwriting Process is the most important part of securing the funds for your business needs.
Loan Underwriting Process –
Underwriting can be called a process in which or a process that the lender uses to decide or make a decision on whether to loan you the money and if so, then under what conditions it should be. Besides that, one of the facts that are very important for people to know is that lenders want to give loans to people who are highly likely to repay back the loan.
Working of the Loan Underwriter –
A loan underwriter will evaluate the loan application after you have or the borrower has submitted all the necessary documents to find out if the borrower is qualified to get the financing that they have requested. A loan officer will commonly manage the underwriting at a traditional bank and in some cases a non-bank lender. How much of the process is done by an individual differs for online lenders as it is most of the time automated. When non-bank lenders do the promotions and advertisements for the loan approval in a matter of hours or minutes, that happens because the underwriting process has been computerized and they have a Loan Document Software too.
Besides that, during the underwriting process, a loan officer or lender will look at your personal history and business financial history, and then they will make an offer ensuring that they will make as much money back as possible. The lenders including non-bank lenders and bank lenders want to fulfill 3 conditions during the small business underwriting.
They are – finding how big or risky it can be to give you a loan, minimize the loss, if things do not work well with your loan, and minimize the cost of the underwriting process. Your level of risk can be found by your personal and business credit scores. For the borrowers who are at high risk, the loan officer would recommend charging a high rate of interest to reduce the loss of the lender if the loan is not paid back.
The price of Small Business Loan Underwriting is based on the number of hours the loan officer or the lender or the lending bank officer spends evaluating the documents and deciding the term & conditions of the loan. Also, the process is partially or completely automated due to which the online lenders will commonly spend less time than banks on the resources that are required to underwrite a loan.
Conclusion
Things will differ basis on the amount that you have asked for and the documentation that you have provided. Online lenders are faster than the banks but you will get a high rate of interest. In a traditional bank, the loan officer will write a report stating why you should or should not be approved for the loan or given the loan. The report will also include the suggested rate of interest and other T&C of the banks. It would then be passed to the committee for final approval. Plus, the committee can make alterations to the report and send it back to the loan officer.
