It is no secret that the private lending industry can be highly complicated and technical. There are countless rules and regulations to follow, and there is a great deal of risk inherent in the business. For this reason alone, the industry relies on strong processes that ensure deals remain on track and within compliance standards. Given the level of detail and technical knowledge that must be applied to each deal, how can lenders ensure these needs are being met at volume? At Archwest, we think the answer is simple: tuning in to the people involved.
When a lender evaluates deal flow less as a transaction to track on paper, and instead looks more deeply at the people involved, this can help to build much stronger processes that are scalable and repeatable. Here are four prime areas on which to focus:
Empowering your team
As with any industry, the key to managing a successful team is to leverage the right talent in the right role. At Archwest, we believe firmly in two elements: establishing management teams who have deep expertise in the core competencies of the departments they oversee, and cross-departmental training. With this blend, organizations ensure that each department team has an expert at the helm while also being able to build processes and checklists that connect cohesively across departments.
For example, Archwest’s closing team is led by two women with extensive escrow and title expertise. Although it is not common in the industry to have a closing team learn the nuts and bolts of title work, we pride ourselves in teaching all our closing associates the importance of title insurance and required endorsements. Due to this, our team does not outsource title review to a third party, and we conduct all the analysis needed in-house. This not only increases efficiency but allows us to control the narrative and field client questions without having to reach out to others for answers.
To truly empower a team, it is also critical to never lose touch with day-to-day point of contacts, as they will have the closest perspective to the work’s execution. Many leaders may be astounded by what they learn when asking questions such as “what is making your job most difficult right now?” or “what elements of your role do you most enjoy?” The wealth of insights and ideas that come from these conversations are invaluable.
No single leader is meant to have all the answers. By empowering the team around you and showing appreciation for each team member’s voice, associates will want to speak up and contribute. Nothing is more powerful than when all team members row in the same direction, for the betterment of the company.
Embracing feedback and optimization
When a leader truly understands and respects the humans behind their business, embracing their feedback becomes much more natural. And this feedback is critical to fine-tuning and streamlining processes to ensure deal flow can continue to scale.
For example, after receiving valuable feedback from trusted broker sources, our team at Archwest pivoted to performing only soft credit checks as part of our diligence requirements. In this business, borrowers run the risk of lowering their credit scores because of frequent hard inquiries each time they apply for loans. We want to help borrowers receive the funding needed for a successful project, and soft credit pulls allow us to do so just as efficiently.
Our team is particularly proud of how quickly we have turned feedback into enhanced processes. At Archwest, we combed through the application process to further enhance the types of information we collect from our clients. Based on feedback from borrowers and brokers alike, our team reduced our loan application from eight pages to three, excluding the signature page. By eliminating information, we can collect without input from the client, we were able to streamline the process without enhancing any additional risk.
Establishing long-term relationships with borrowers, brokers, title companies and escrows
Embracing the mentality of serving clients as a financial partner, and not just a lender, can make all the difference in establishing a relationship with borrowers for the long term. As a key partner, one of your chief roles is to ensure that your borrowers have a smooth and positive experience throughout the project’s lifecycle.
Giving guidance above and beyond the scope of loan closing and servicing – such as helping clients understand the budget, market fundamentals, initial due diligence, or escrow and title requirements at inception – demonstrates a partner’s commitment. A financial partner wants a borrower’s project to be successful, but not solely for the bottom line on a single deal. Focusing on the long-term relationship is what drives opportunities for future projects.
To ensure a smooth experience, lenders may consider establishing a distinct, branded process that borrowers can learn to count on through the loan closing. Clear communication and consistency are crucial. The process should be no more than a few steps and help borrowers understand what to expect from the deal’s flow.
Building trust with brokers
Brokers arguably understand people and relationships better than any other group. The broker community pays close attention to all the industry players and understands the nuances and reputations of each team. For this reason, it is essential to build strong processes and teams that brokers learn they can rely on to execute deals.
If a hurdle arises during escrow or with a seller, brokers will look for financial partners who have a process for addressing these challenges and will roll up their sleeves to resolve the issue. Deal closings are the lifeblood of a broker’s business, so at the end of the day, they will turn to the lenders they know they can trust to execute. At Archwest, direct access to capital and having sole authority to make credit decision without layers of approvals are valuable attributes that brokers appreciate in a lender.
Optimization is a consistent process and should never stop. For these processes to truly be scalable and repeatable, test them continually. This is particularly important with technology components. When launching a borrower portal, for example, our team beta tested the portal for weeks to identify every potential pitfall and what the impacts may be to each department. After launching the portal, we test the functionality regularly and do not rely solely on technology to alert us to kinks in the process.
I am always astounded by the overwhelming perception of the lending industry as a business built on spreadsheets and bottom lines. I would argue that people are the essence of the industry. People build and manage the processes that enable the business to run and deals to flow. We are, and will always be, in a people-focused business.
Author Information:
Tricia Mitchell
Chief Operating Officer
Archwest Capital
tmitchell@archwestcapital.com
archwestcapital.com
