How to future-proof lending by streamlining PPP forgiveness
Since the Paycheck Protection Programme’s (PPP) inception in April, lenders throughout the country have scrambled to direct the programme’s $660 billion of relief to small businesses in need. With that came challenges — largely driven by lenders’ out-of-date manual processes and overall operational inefficiencies — all of which ring true for the forgiveness process.
MuleSoft and Codat have partnered to offer lenders a way to streamline the forgiveness process by automating the collection of required data from small businesses. This will ultimately save both time and money for the lender and their business customers.
Codat offers a single API that creates a direct connection to the financial software used by small businesses. Lenders can use this API to improve their customer experience by streamlining arduous, manual processes of collecting and spreading financial statements.
Codat has built a MuleSoft-certified connector, enabling customers to easily integrate with Codat’s API using Anypoint Platform.
How banks can adapt their lending processes moving into 2021
Codat connects the internal systems of small businesses to banks, fintechs, and other financial institutions — allowing business data to flow back and forth in real time — all via a single API. When it comes to PPP forgiveness, there is clear value to lenders in having automated and real-time access to customers’ financial data.
However, connectivity and the free flow of business data between businesses and lenders will revolutionize lending far beyond the immediate need during PPP origination and forgiveness.
In this article, we outline three ways in which technology can help to streamline the forgiveness process and allow lenders to move forward with confidence in 2021 and beyond.
3 ways banks can lend with confidence
1. Digitise manual processes for the customer and lender
Investing in digital transformation is clearly great for business. Lenders who were slowly digitising their processes were caught off guard when the pandemic hit, and those who relied on manual processes to submit loans found themselves unable to deal with the demand, resulting in delays and missed opportunities for SMBs.
More generally, this lack of efficiency holds back innovation and slows down time to value, resulting in financial drain on the lender.
Internal digital transformation essentially means reevaluating and improving operational efficiency. Improvements in banker experience have not yet matched improvements in customer experience. Banks should not only be 100% digital for their customers but also when it comes to their internal operations.
Lenders need to take processes that have previously been static and make them dynamic for the duration of the loan lifecycle. From automating initial data gathering to loan reviews and renewals, reporting, and collections.
By automating the collection of business data through a single API, SMBs can now share data with a lender with a click of a button by simply connecting their accounting software platform.
Not only are lenders then able to make accurate decisions based on real-time data, the entire end-to-end lending process is now streamlined and automated from decisioning to monitoring to renewals.
2. Leverage open data from countless sources
Thanks to digital transformation, every small business now has a vast data footprint — from commerce transactions to social media presence, POS data, companies house, inventory, banking transactional data, and accounting data.
All of this data is valuable for a lender to understand how a business is truly performing, where they may be running into trouble, where there may be trends and whether they be regional or across industries.
The future of lending will be based on having automated, consensual, and ongoing access to business data.
In the shorter term, lenders can and should harness this significant data footprint to automate loan forgiveness processing. For instance, by obtaining insight into the payroll and utility expenses found in the accounting packages of their small business customers, lenders gain the evidence they require to quickly and accurately calculate forgiveness. Automating this process not only reduces instances of misreporting, it also creates operational efficiencies by minimizing the need for cumbersome documentation collection.
3. Proactively manage loan servicing and forgiveness
Past performance is no longer a guide to future prediction. During the best of times, a small business’ financial situation or circumstances can change quickly, and this has been intensified due to the pandemic and economic situation.
For lenders, managing their new, vast loan books efficiently as well as managing inevitable defaults and fraud will be their greatest challenge during these turbulent times.
To reduce default risk, business data must be monitored proactively in real time and on an ongoing basis. Lenders can therefore identify various sector and region-specific trends as well as reach out to borrowers if they are showing signs of distress to work out a mutually beneficial solution. The earlier that distress is spotted, the easier it is to stop and restructure. Inversely, banks could also encourage small businesses to pre-pay on their loans if they are performing well.
This is also particularly relevant to the case of PPP forgiveness. Guidelines stipulate that loan proceeds used for specific expenses following the eight-week period after the loan is made may be forgiven, necessitating the tracking of allowable expenses on an ongoing basis.
To learn more about MuleSoft’s solution to loan forgiveness, in partnership with Codat, contact your AE or visit here. To find out more about Codat and how accounting integrations could help your business please reach out to [email protected].
Learn more about Codat’s new MuleSoft Connector.